Why has TSMC changed its style? Less than a year this year, I proposed to increase the price of OEM fees twice. I am very confident in my leading position in semiconductor . Now, my style has changed and I have begun to persuade employees to go home during holidays, spend more time with my family, and recharge more. Is this not working anymore? Don't want to make money anymore? In fact, there is nothing we can do about TSMC.
TSMC's top ten top customers have cut orders since the third quarter, among which MediaTek cut the most fiercely with Nvidia. Recently, news even came out that a large buyer of a 3nm process changed his mind temporarily and canceled orders, and TSMC cut down up to 50% of the orders in the supply chain. Global demand for chips has fallen sharply this year, and the new US bill has excluded the largest mainland market, so it is reasonable to see a decline in transaction volume.
TSMC
TSMC President Wei Zhejia personally sent an internal letter to encourage employees to go home for vacation. The next day, TSMC's stock price fell by more than 4%. Why is this happening? The answer is actually very simple. Global chip supply has begun to oversupply, and people no longer need so many chips. It is transmitted to the upstream of the industrial chain. TSMC, which relies on a single large customer in the United States, is also sluggish.
In fact, starting from May, signs of chip order cuts emerged. At that time, it had little impact on TSMC. However, among the top ten TSMC customers, the order reduction rate of MediaTek, AMD, Nvidia and other five companies have exceeded expectations, and the delivery date has been postponed. This taste is very uncomfortable.
TSMC has lowered its capital expenditure in 2022 to $36 billion, reducing its absolute amount by at least $4 billion. This means that in order to ensure that TSMC has no problems with its cash flow, it would rather cut off the potential benefits that US$4 billion may bring in the entire supply chain (Taiwan Economic Daily data).
TSMC said that the terminal market demand has decreased, coupled with the delay in customer product progress, TSMC's 6-nanometer and 7-nanometer capacity utilization rate will fall, and this situation is estimated to continue until the first half of 2023.
chip industry has a lag in the expansion of production capacity . Starting from 2020, major manufacturers are working hard to build new production capacity, which has led to a continuous overcapacity. If there is a super-large market, this phenomenon will be alleviated. China happens to be the world's largest chip market, and consumes about three-quarters of the world's chips. But the US chip bill prevents chips from entering China, and is determined to allow chip manufacturing to flow back to the US mainland.
and even the United States put pressure on TSMC long before the Chip Act, resulting in TSMC's revenue from the mainland being continuously reduced. In 2020, TSMC had about 54.2 billion yuan in revenue from mainland China, but in 2021, this number has dropped to 36.7 billion yuan ( Observer Network data).
US allocated US$52 billion to develop semiconductor manufacturing
TSMC's performance has a considerable relationship with the mainland market. After Huawei foundry, although there is support from US companies, TSMC's revenue growth rate has declined significantly compared with 2020: TSMC's total revenue in 2021 was about RMB 354.9 billion, and increased by 18.5% year-on-year; net profit before tax was about RMB 148 billion, an increase of 13.4% year-on-year. In 2020, the growth rate of these two performance indicators was 25.2% and 50.0% (TSMC Financial Report).
Now TSMC's largest customer is Apple , but the sequelae of losing Huawei have begun to appear. Under the premise of a downturn in the global chip industry, TSMC's major customers have successively canceled orders for advanced manufacturing processes, and even Apple has stopped TSMC's 3-nanometer orders.
One of the advantages of TSMC is that it has about 80 lithography machines , used to produce advanced processes from 3 to 7 nanometers, but the cost of lithography machines is very high, one power consumption is about 1 million watts, and it is expected to consume 12.5% of the all-energy consumption in Taiwan by 2025 (Bloomberg data). Now there are no orders, and TSMC's high efforts cannot be rewarded, so there is a plan to start closing some lithography machines at the end of the year.
US chip restrictions on China stimulate China's innovation
In addition to being cut by large customers, TSMC will also face competition from mainland manufacturers in the future.Although the United States has announced a number of chip bans to restrict the sale of advanced chip manufacturing equipment to China, lithography machine giant Dutch ASML has refused, insisting on exporting lithography machines to China, emphasizing that it will firmly support the Chinese market.
