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Author | Panda
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TSMC's current various chip process diagrams (data excerpted from TSMC's 2016 business overview)
10 nanometer process has been used in the chip manufacturing of Apple's latest series of mobile phones. You can experience the latest advanced process technology after changing to a new phone. The next generation of 7nm process is ready for development and is expected to be mass-produced in 2018. According to Moore's Law, the next process target after 7 nanometers is 5 nanometers. TSMC's 5-nanometer process starts research and development in 2016, and plans to start trial production in the second quarter of 2019 and put into mass production in 2020. Although the process size is approaching the physical limit, TSMC still follows Moore's Law.
According to the 2016 annual report, TSMC's main customer type is fable semiconductor companies, with revenue of up to 788.5 billion NT$1 (calculated at NT$30.37, equivalent to NT$25.96 billion), accounting for more than 80% of its main business revenue. It can be seen that TSMC's contribution to the vertical division of labor in the semiconductor industry.
data comes from TSMC's 2016 annual report
From the perspective of revenue regional contribution, the main contribution comes from North America, accounting for more than 65%.
is worth noting that the proportion of revenue from China has increased. Benefiting from the explosion of the Chinese domestic brand smartphone market, the revenue contribution and proportion of revenue in China have grown rapidly. From a regional perspective, the North American company with the most developed semiconductor industry (mainly American companies), as TSMC's most loyal customer group, still supports most of its revenue.
The original Zhang Zhongmou returned to Taiwan from Texas Instruments to set up TSMC, with the goal of taking away the orders for wafer foundry of American semiconductor companies and promoting the vertical division of labor in the industry. As the US semiconductor industry grows and grows, TSMC has been growing and growing.
From the product category, we can see that the development momentum of the semiconductor industry comes from communication equipment (mainly smartphones), becoming the engine of industry growth.
0 Data comes from TSMC's 2016 annual report
. "Big Beast" with a huge scale and excellent operating level
Usually the economic law is that too large scale will restrict profitability. The semiconductor wafer foundry industry is highly technology-capital intensive, and with the development of the industry, the industry shows a more concentrated trend. TSMC, as the industry leader, can maintain a gross profit margin of about 50%, its stable R&D expense level, and control excellent operating cost level. It can be regarded as a model for being responsible to shareholders and continuously giving shareholders excellent returns to shareholders around the world.
data comes from TSMC's 2016 annual report
operating numbers will show the difference only after comparison. Comparing the SMIC (981.HK) and Huahong Semiconductor (1347.HK) that are produced in the same wafer, we can find that TSMC's revenue in 2016 was about RMB 200 billion (calculated from RMB 1 to NT$4.5), and its revenue scale is about 10 times that of SMIC and Huahong Semiconductor 40 times. TSMC's gross profit is about 20% higher than that of SMIC and Huahong Semiconductor respectively.
: To put it a little off topic, companies that do not have such good performance may not be worthless. For example, low gross profit margin and huge fixed expenses provide greater performance elasticity.
Data is excerpted from Wind
Even if TSMC's revenue scale of nearly NT$900 billion is not considered, the company's gross profit margin is only about 50%, and the effective cost control level is improved. Its net profit margin of 33% per year can definitely be admired by most listed companies. With a revenue scale of nearly NT$1 trillion, it can still maintain such excellent operating results and will definitely be a god.
TSMC's stock price monthly chart (January 2010 to September 28, 2017)
3. Where is the moat of TSMC?
shares of the god Buffett leaves everyone with many familiar investment concepts, one of which is to find companies with a solid moat.What is TSMC's moat? I believe everyone can search for a lot of information on this topic online to discuss this topic.
1. The continuous technological progress and upgrading promoted by Moore's Law in the semiconductor industry has formed the characteristics of highly consuming technology and capital, requiring enterprises to keep up with the pace of technological progress, while ensuring extremely high yield rates, and extremely high requirements for technology and process accumulation. New industry players and small-scale companies face major challenges, and the industry will inevitably easily form a situation where "the remaining ones are king".
Currently, the industry giants are Intel , Samsung and TSMC. Each of these three giants is strong and rich enough to rival a country, and has an overwhelming advantage over new entrants.
2. End customers in the semiconductor industry have extremely strict requirements on hardware supply, especially the new process ultra-small chips are likely to cause excessive heat generation or excessive energy consumption. For the sake of maintaining product quality and brand, end customers usually have extremely strict requirements on chip performance and quality.
End customers will select the chip foundry with the most reliable performance to complete the production and manufacturing, and cannot bear the potential risks brought by delivering orders to foundry with weaker technology and technology. Therefore, the first place in the industry will gain a greater order advantage than the second place.
For example, in Apple IPhone6S and IPhone6S Plus, Apple once used Samsung and TSMC as chip foundries at the same time. Samsung foundry chips produced by them have a large amount of heat and power consumption, which eventually led to Apple choosing TSMC as its exclusive chip foundry among its later mobile phone products.
TSMC production workshop (pictures are from the Internet)
3 and adopt the most advanced technology and management methods to continue to maintain internal innovation.
In May 2017, TSMC CEO Wei Zhejia revealed in a forum that TSMC has applied big data and machine learning technology to process management, shortening the current time for producing a chip from the previous average of 2 days to the average of 1.1-1.2 days, significantly shortening the production cycle of .
Currently, the most advanced mobile phone chips have an average of 80 layers. After the production cycle is improved, the product cycle will be shortened from nearly half a year to about 3 months. Downstream end customers have increasingly high requirements for product cycles, and the compressed production cycle can better match the needs of downstream customers and enhance their competitiveness.
In fact, the above points are summarized as follows: is a business that is difficult to do but has a lot of market space. I persisted and insisted on doing it well. When I looked back, I found that a group of competitors died, fell behind, and then eliminated a group. Finally, there were a few old acquaintances left to play happily together. This should be able to better summarize TSMC's moat.
In the study of TSMC, we discovered another company, which is the king of the semiconductor equipment field. Who will win this title?
See the next article: "Storm in the Semiconductor Industry | Who is the real king in the semiconductor industry chain? (Part 2)》
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