Electronic Audience Network Report (Text/Liang Haobin) On the afternoon of October 14, TSMC held an online legal person briefing meeting (hereinafter referred to as "Legal Affairs Meeting"). As the world's largest wafer foundry, TSMC's legal theory has always been one of the weather vanes of the semiconductor industry. The main topics of this legal meeting include the third quarter financial report, the fourth quarter outlook, capital expenditure, raising OEM prices, next year's outlook, advanced process progress, global layout, etc. The following are three key points sorted out by Electronic Audiophile Network.
2021Q3 net profit increased by 14% and exceeded expectations. Advanced processes within 7nm contributed 52% of revenue
TSMC's financial report today showed that in the third quarter of this year, its consolidated revenue was approximately US$14.88 billion (approximately RMB 95.8 billion) and a year-on-year increase of 16.3%, a month-on-month increase of 11.4%, a record high; while net profit increased by 14% year-on-year, about US$5.6 billion (approximately RMB 36 billion), and earnings per share was equivalent to American depositary receipt per unit, setting a new high and higher than market institutions' expectations.
At today's online legal meeting, TSMC stated that due to the "improving back-end profitability and a more favorable combination of process technology", the gross profit margin in the third quarter reached 51.3%, which also exceeded expectations.
From the description of TSMC, we can guess that the sharp increase in gross profit margin is likely to come from the overall price increase of the foundry business. Entering 2021, major wafer foundries either raise prices or are on the road to price increases. TSMC, which has not adjusted its foundry prices in recent years, has finally been unable to hold back. In August this year, it was reported that TSMC will comprehensively increase the wafer foundry quotation, 7nm and more advanced processes will increase by 10%, and mature processes above 16nm will increase by 10%-20%.
However, at the French Diploma meeting, TSMC rejected comments on the related price increase news, saying that the company's pricing strategy is "strategic, not opportunistic ".
Taipei also revealed that 7nm and more advanced process revenue accounts for 52% of 2021Q3 revenue, of which 5nm accounts for 18% and 7nm accounts for 34%. According to application fields, smartphones are still the main force in revenue, accounting for 44% of total revenue. However, the automotive industry, which has been extremely short of chip supply recently, only accounts for 4% of its revenue, and the growth rate is only 5%.
Judging from the growth rate of various application fields, TSMC's growth in Q3 this year mainly comes from the Internet of Things and smartphones, with revenues in these two markets increasing by 23% and 15% respectively. In addition, HPC (high performance computer) also saw a 9% increase, while consumer electronics fell 2%.
TSMC CEO Wei Zhejia said that the development of 5G and high-performance computing will greatly increase the demand for high-performance computing and low power consumption in the future, which requires the pointing of TSMC's advanced processes. At the same time, these trends will not only increase the number of unit products, but will also increase the content of semiconductor in applications such as high-performance computing , smartphones, automotive electronics and the Internet of Things.
Looking forward to the fourth quarter, TSMC CFO Huang Renzhao pointed out that based on the exchange rate of NT$228 html to 1 USD, TSMC expects revenue to be between US$15.4-15.7 billion, with a conversion quarterly increase of about 3.5%-5.5%, which is expected to break the record again; the gross profit margin in the fourth quarter is about 51%-53%, and the operating pure yield is expected to be 39%-41%. In addition, the cost of subscribing to the new crown vaccine may affect the operating pure yield of about 1%.
Regarding the company's long-term gross profit margin trend, Huang Renzhao said that the six factors that determine TSMC's profitability are: leading technological development and mass production capacity, product pricing, cost reduction, capacity utilization, technology combination and uncontrollable exchange rate. TSMC evaluates the above six factors and believes that in the long run, gross profit margin of more than 50% can be achieved.
officially confirmed that Japan has set up a factory, Wei Zhejia: Oversupply will not happen to TSMC
Wei Zhejia also officially announced today that with the support of Japanese officials and customers, TSMC will set up a factory in Japan. According to reports, TSMC's factories in Japan will focus on mature processes and special processes, such as 22nm, 28nm, etc. It is initially planned to start building a factory in 2022 and mass production will be achieved as soon as 2024.
As for details such as investment amount, they will be announced at the next legal meeting. However, Huang Renzhao revealed that the investment budget of , which is a related project of Japan's factory, is not included in the three-year $100 billion budget previously announced by TSMC. In addition, according to industry insiders, Sony and Denso also participated in TSMC's Japanese factory establishment plan.
In fact, TSMC has been rumored to have a factory in Japan for a long time. At this year's shareholders' meeting, TSMC also stated that it had evaluated the investment in setting up a factory in Japan, but there was no clear evaluation result at the time.
It is obvious that TSMC's overseas expansion has been accelerating in recent years. Under the long-term influence of the global chip supply chain due to the epidemic and the geopolitical , countries are seeking to build a local semiconductor supply chain. As the world's largest wafer foundry company, TSMC has become the hottest target to win over.
However, some analysts have also said that the expansion of production capacity will bring the risk of oversupply. Regarding these concerns, Wei Zhejia said: "If there is any possible oversupply, it will definitely not happen to TSMC. For example, the special process technology of 20nm cannot be provided by competitors. TSMC's investment is based on customer needs."
3nm mass production in the second half of next year, and is not afraid of Samsung's 2nm challenge
Previously, some overseas institutions said that TSMC's 3nm process encountered technical problems and may be delayed until the first half of next year, which is delayed by 1 to 2 quarters compared with the original plan. Wei Zhejia responded to the rumor at the Fascist meeting that the progress of the 3nm process is in line with the progress and will be trial production this year and mass production in the second half of next year.
At the same time, Wei Zhejia also announced that TSMC will launch a new N3E process one year after mass production of the 3nm process, which means that the N3E process will be mass-produced in the second half of 2023, filling the time gap between 3nm and 2nm.
Samsung has recently surpassed TSMC in the progress of advanced processes. In addition to using more advanced GAA technology on the 3nm node, it also said that it will surpass TSMC in the 2nm process by 2025. Wei Zhejia also revealed the progress of TSMC's 2nm process for the first time at this legal lecture. He said that TSMC's 2nm process will adopt a GAA architecture and is expected to be mass-produced in 2025.
Speaking of Samsung's 2nm progress, although Wei Zhejia expressed his unwillingness to comment on competitors, he emphasized that TSMC's 2nm process will be the most advanced technology in terms of density and efficiency. He is very confident that TSMC maintains its industrial competitiveness and leading position in advanced processes.
The shortage of wafer foundry will continue until 2022; the supply chain challenge of the automobile industry cannot be solved
The shortage of supply may be a must-have topic at the TSMC Fa Conference in the past two years. In the face of the legal person’s question at this legal lecture, Wei Zhejia reiterated that the shortage of wafer foundry production capacity will not only not be resolved this year, but will continue until 2022. He stressed that TSMC's wafer foundry capacity is still in short supply, and demand mainly comes from the 5G and HPC fields. In addition, other fields such as automobiles, Internet of Things, servers, smartphones, etc. continue to drive the continued increase in demand for semiconductor components. Especially due to TSMC's exclusive advantage in advanced processes, the supply and demand imbalance to a certain extent has deepened to a certain extent.
On the other hand, the shortage of automotive chips continues to affect global automotive production capacity, which is also a focus of attention from all walks of life. TSMC Chairman Liu Deyin said in an interview in October that many car companies point the source of the chip shortage problem to TSMC, but TSMC observed the automotive chip supply chain and understood customer needs through the multiple data verification mechanism to find out that there must be someone in the automotive chip supply chain that is stockpiling, which is not entirely a problem in the chip foundry process.
At the legal talk meeting today, many legal persons also paid attention to the dynamics of automotive chips. Wei Zhejia said: "The automotive supply chain is quite complex, but TSMC has tried its best to increase production capacity to support automotive customers to solve supply problems. But we cannot solve the supply challenges of the entire industrial chain. For example, the epidemic in Southeast Asia has caused factories to stop production, which has affected the supply of some automotive chips."
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