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As the "handle" in the field of semiconductor contract manufacturing (Foundry), TSMC has always enjoyed the title of "not afraid of the semiconductor downward cycle". With the weakening semiconductor market, the cold wind finally tore a hole in TSMC.

Fu Bin, author

Li Tuo (Editor)

1. The market that can't get up is as early as 2023Q1, and TSMC predicted a decline in this quarter, so what's the 2023Q2 score?

Second-quarter results released by TSMC on July 20 showed that Q2 revenue fell 10% year-on-year and 5.5% month-on-month (13.7% year-on-year and 6.2% month-on-month in dollar terms); net profit fell 23.3% year-on-year and 12.2% month-on-month (26.5% year-on-year and 12.9% month-on-month in dollar terms).

TSMC 2023Q2 revenue table [1] data is even more ugly, but interestingly, the performance has been better than the market expectations.

In fact, there are signs of an overall decline in 2023Q1. Although TSMC's revenue and profits have increased compared with the same period last year, there has been a month-on-month decline. [2]

Looking at the proportion of 2022Q2~2023Q3 TSMC's business, high-performance computing (HPC) and smart phone (SmartPhone) business have the greatest impact on TSMC's performance, and the proportion remains stable, with a combined share of nearly 80% for a long time, followed by the Internet of things (IoT), which fluctuates at 8% to 10%. The rest is driven by automotive (Automotive) and digital consumer electronics (DCE).

The proportion of each business of TSMC 2022Q2~2023Q2 [1] ~ [5], mapping (Fruit Shell hard Technology). From the growth rate of TSMC 2022Q2~2023Q2 business, the downward impact of TSMC 2022Q2~2023Q2 semiconductor cycle has deepened, mobile phone and Internet of things business continued to decline, and digital consumer electronics 2022Q4 declined by 23% in that quarter, and then gradually heated up. High-performance computing also declined due to the influence of the market in 2023, but the market improved slightly under the demand for high-performance devices driven by the explosion of generative AI. Although the automobile market declined, it still maintained a high market volume.

TSMC 2022Q2~2023Q2 business growth rate (QoQ) [1] ~ [5], mapping? fruit shell hard technology 2022Q2~2023Q2, the proportion of shipments of TSMC process process remains stable. Among them, 5nm is becoming more and more important to TSMC, accounting for about 30%. As a leading contract factory in the world, the importance of advanced technology is becoming more and more prominent; 7nm, as a stable source of income, accounts for more than 20%; 16nm shows a slow downward trend; 28nm~65nm and above process income is stable, which means that mainstream process products will still have a place in the market, including power semiconductors, optical communication chips, MCU and other products.

The proportion of 2022Q2~2023Q2 TSMC process process shipments [1] ~ [5], in terms of capacity utilization, 2023Q2 still shows a declining trend, 5nm and 7nm process income overall slightly decreased, 2022Q3~Q4 is no longer the scene. You know, top processes such as 5nm and 7nm include high-performance computing, high-end automotive chips, high-end mobile phone chips, CPU, GPU, DPU and other products. In theory, there is no shortage of buyers for advanced processes, but the demand in the downstream market is sluggish, and any player in the entire industrial chain cannot escape.

2023Q2 TSMC 7nm and 5nm income [1] 2. Looking for warmth in the cold for the second half of the year, TSMC is still relatively pessimistic.

At the legal meeting, TSMC expects 2023Q3 sales to reach US $16.7 billion to US $17.5 billion, gross profit margin of 51.5% to 53.5%, slightly lower than the market estimate of 53.6%, operating profit margin of 38% and 40%, and also lower than the market estimate of 41.3% [6]. Not only that, for the whole year, TSMC also forecast a decline of 10% (in US dollar terms), compared with an original forecast of 1% to 6%. [7]

Although TSMC has not revised its capital expenditure for the whole of this year, which remains at US $32 billion-US $36 billion, TSMC will continue to reduce its capital expenditure in the next few years. [7]

This time, TSMC has also made a rare major adjustment to its global wafer production plans:

Production plans for factories in Arizona will be postponed from 2024 to 2025.

Japanese factory will be put into production in 2024

Is evaluating the construction of a fab in Germany

28nm production capacity is being expanded in Nanjing as planned.

Recently, the AI carnival of the industry is still staged, and many people are optimistic about the prospect of computing chips, power semiconductors and optical communication chips in the industry chain. But unfortunately, AI did not become the savior.

At the legal conference, TSMC said that it had included AI in capital expenditure and long-term sales prospects. Although AI can bring about 50 per cent growth in the future, TSMC cannot fully meet customer demand for AI at present, and it is also difficult for AI to offset weak end market demand caused by macroeconomic weakness. [7]

In the future, TSMC may rely more on advanced processes:

In 2023, advanced process technology will account for 70% / 80% of the total, mature special technology will account for 10% / 20%, and the rest will be allocated to advanced packaging, testing and other projects.

Advanced packaging is the key to the competition for advanced computing power. So far, strong competitors such as Samsung and Intel are vigorously developing packaging technology, while TSMC will nearly double its advanced packaging capacity.

3nm shipments will be larger than 5nm / 7nm, although the proportion of revenue may not be very high, the increase in 3nm capacity and electricity costs in the second half of the year will be a great challenge.

2nm chips are expected to be mass produced by 2025, and customers are very interested in the application of 2nm in high-performance computing and mobile phones.

Since the beginning of this year, more and more enterprises and institutions believe that semiconductors are about to hit bottom and that the downward cycle may end at the end of the year or early next year, but the future of the world economy is still a mystery, and there are no obvious signs of recovery in downstream demand. maybe the semiconductor downside won't brake immediately.

For the future of the semiconductor industry in 2023, TSMC maintained its previous forecast that, with the exception of the storage business, global semiconductor revenue for the whole year was expected to decline by 40.6%, while the wafer foundry industry was even more bleak, revised down from a recession of 70.9% to 14.1%. [8]

At this stage, the chill of the market will undoubtedly continue to have a chain reaction. As early as in 2023Q1, some media said that the impact of the decline in revenue, price and capacity utilization of TSMC will be passed on to the upstream equipment manufacturers [9], and the downside of 2023Q2 will still bring more negative feedback to the industry chain.

References:

[1] TSMC official website: 2023 Second Quarter Earnings Conference.2023.7.20. https://investor.tsmc.com/ english / encrypt / files / encrypt_file / qr / phase4_reports / 2023-07/744c606bd151c81b4cb675512a8f1ab9993c1160/2Q23Presentation%28E%29_WoG.pdf

[2] TSMC official website: 2023 First Quarter Earnings Conference.2023.4.20. https://investor.tsmc.com/ english / encrypt / files / encrypt_file / reports / 2023-04/8647f0e714162975c5740e709c0990a326c3bbb7/1Q23Presentation%28E%29.pdf

[3] TSMC official website: 2022 Second Quarter Earnings Conference.2022.7.14. https://investor.tsmc.com/ english / encrypt / files / encrypt_file / reports / 2022-07/543ddc8ea483d7767592012bc4b9727e70b09a1b / 2Q22Presentation%28E%29.pdf

[4] TSMC official website: 2022 Third Quarter Earnings Conference.2022.10.13. https://investor.tsmc.com/ english / encrypt / files / encrypt_file / reports / 2022-10 / f5dc70ecc11508db51dffaf9d165c232cc76dcf2/3Q22Presentation%28E%29.pdf

[5] TSMC official website: 2022 Fourth Quarter Earnings Conference.2023.1.12. https://investor.tsmc.com/ english / encrypt / files / encrypt_file / reports / 2023-01/92c560bc8693eb0e57efc21d3b6b162dad8afafe / 4Q22Presentation%28E%29.pdf

[6] CTOnews.com: TSMC expects sales in the third quarter to be lower than market expectations, resulting in a slight reduction in gross profit margin at the beginning of 3nm mass production. 2023.7.20. Https://www.ithome.com/ 0/707/036.htm

[7] Financial Associated Press: semiconductor does not believe in AI: TSMC Q3 Financial Forecast and Annual income guidance is lowered. 2023.7.20. Https://www.cls.cn/ detail / 1410175

[8] Voice: TSMC stopped performing, revised its annual outlook for the second time, and expanded the decline in revenue. 2023.7.20. Https://mp.weixin.qq.com/s/0Lem0FUFUCFHBX6PHO-uHw

[9] International Electronic Business Information: looking at the semiconductor industry in 2023 from the financial report of TSMC, 2023.5.17. Https://www.esmchina.com/ news / 10358.html

This article comes from the official account of Wechat: fruit Shell hard Technology (ID:guokr233), author: Fu Bin

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