Taiwan Semiconductor Manufacturing Company Limited (TSM) on Q1 2022 Results - Earnings Call Transcript
Jeff Su: Good afternoon, everyone, and welcome to TSMC’s First Quarter 2022 Earnings Conference Call. This is Jeff Su, TSMC’s Director of Investor Relations and your host for today. To prevent the spread of COVID-19, TSMC is hosting our earnings conference call via live audio webcast through the company’s website at www.tsmc.com, where you can also download the earnings release materials. The format for today’s event will be as follows: first, TSMC’s Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the first quarter 2022, followed by our guidance for the second quarter 2022. Afterwards, Mr. Huang and TSMC’s CEO, Dr. C.C. Wei, will jointly provide the company’s key messages. Then we will open the line for Q&A. As usual, I would like to remind everybody that today’s discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the Safe Harbor notice that appears on our press release. And now I would like to turn the call over to TSMC’s CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance.
Wendell Huang: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the first quarter 2022. After that, I will provide the guidance for the second quarter. First quarter revenue increased 12.1% sequentially at NT terms or 11.6% in U.S. dollar terms as our first quarter business was supported by strong HPC and automotive-related demand. First quarter gross margin increased 2.9 percentage points sequentially to 55.6%, mainly as we continue to sell our value and improve cost. Operating margin increased 3.9 percentage points sequentially to 45.6%, primarily due to lower vaccine donation expense as compared to the fourth quarter. Overall, our first quarter EPS was TWD 7.82, and ROE was 36.2%. Now let’s move on to revenue by technology. 5-nanometer process technology contributed 20% of wafer revenue in the first quarter, while 7-nanometer accounted for 30%. Advanced technologies, which are defined as 7-nanometer and below, accounted for 50% of wafer revenue. Now moving on to revenue contribution by platform. All 6 platforms increased in the first quarter. Smartphone increased 1% quarter-over-quarter to account for 40% of our first quarter revenue. HPC increased 26% to account for 41%. IoT increased 5% to account for 8%. Automotive increased 26% to account for 5%. And DCE increased 8% to account for 3%. Moving on to balance sheet. We ended the first quarter with cash and marketable securities of TWD 1.3 trillion. On the liability side, current liabilities increased by TWD 83 billion, mainly due to the increase of TWD 63 billion in accrued liabilities and others and the increase of TWD 30 billion in short-term loans, partially offset by the decrease of TWD 21 billion in accounts payable. Long-term interest-bearing debt increased by TWD 19 billion as we raised TWD 20 billion of corporate bonds during the quarter. On financial ratios, accounts receivable turnover days decreased 2 days to 38 days, while days of inventory remained at 88 days. Now let me make a few comments on cash flow and CapEx. During the first quarter, we generated about TWD 372 billion in cash from operations, spent TWD 262 billion in CapEx and distributed TWD 71 billion for second quarter ‘21 cash dividend. Bonds payable increased by TWD 20 billion due to the bond issuances. Overall, our cash balance increased TWD 87 billion to TWD 1.2 trillion at the end of the quarter. In U.S. dollar terms, our first quarter capital expenditures totaled $9.38 billion. I have finished my financial summary. Now let’s turn now to our current quarter guidance. Based on the current business outlook, we expect our second quarter revenue to be between USD 17.6 billion and USD 18.2 billion, which represents a 1.9% sequential increase at the midpoint. Based on the exchange rate assumption of USD 1 to TWD 28.8, gross margin is expected to be between 56% and 58%, operating margin between 45% and 47%. In addition, we maintain our 2022 capital budget to be between USD 40 million and USD 44 billion. This concludes my financial presentation. Now let me turn to our key messages. I will start by making some comments on our first quarter and second quarter profitability. As a reminder, 6 factors determine TSMC’s profitability: leadership, technology development and ramp-up, pricing, cost reduction, capacity utilization, technology mix and foreign exchange rate. As we discussed earlier, our first quarter gross margin increased by 290 basis points sequentially to 55.6%, mainly due to cost improvement and value-selling efforts and a more favorable foreign exchange rate. Our gross margin guidance provided 3 months ago was based on exchange rate assumption of USD 1 to TWD 27.6, whereas the actual first quarter exchange rate was USD 1 to TWD 27.95. This created about 50 basis point difference in our actual first quarter gross margin versus our original guidance. We have just guided our second quarter gross margin to further increase by 140 basis points sequentially to 57% at the midpoint primarily due to a more favorable exchange rate assumption of USD 1 to TWD 28.8, which brings more than 100 basis points gross margin tailwind and continued cost improvement and value-selling efforts. Looking ahead on our profitability, we continue to face challenges from rising inflationary costs, increasing process complexity of leading nodes, new investments in mature nodes and overseas fab expansions. Despite the manufacturing cost challenges and excluding the impact of foreign exchange rate, of which we have no control over, taking the other 5 factors into consideration, we continue to believe a long-term gross margin of 53% and higher is achievable. Now let me turn the microphone over to C.C.
C. C. Wei: Thank you, Wendell. We hope everybody is staying safe and healthy during this time. First, let me start with our near-term demand and inventory. We concluded our first quarter with revenue of TWD 491.1 billion or USD 17.6 billion, which is above the high end of our guidance, mainly due to better demand from smartphone and automotive-related applications than our forecast 3 months ago and customer’s continuing need to ensure supply security with the emergency of COVID-related uncertainties. Moving into second quarter 2022. We expect our business to be supported by HPC and automotive-related demand, partially offset by smartphone seasonality. On the inventory front, we expect the supply chain to continue to maintain a higher level of inventory as compared to the historical seasonal level for a longer period of time, prolonged by recent COVID-related supply chain disruptions and uncertainties brought about by geopolitical tension. On the demand side, despite the recent macro-related uncertainties, we continue to observe the structural increase in long-term semiconductor demand, underpinned by the industry makeup trend of 5G and HPC-related applications. This multiyear megatrend will support , the device unit volume growth, and much more importantly, drive substantial semiconductor content enrichment in many young devices across HPC, smartphone, automotive and IoT applications. With our technology leadership, TSMC is well positioned to capture the strong structural demand with our advanced and specialty technologies. And we expect our capacity to remain tight throughout 2022. 2022 will be another strong growth year for TSMC. And we expect our full year growth to likely be at or exceed the high end of our guidance range of mid- to high 20s percent in U.S. dollar terms. Next, given the recent constraint in the tool supply chain, let me talk about the tool delivery update. As a major player in the global semiconductor supply chain, TSMC worked closely with all our tool suppliers to plan our CapEx and capacity in advance. However, like many other industries, our suppliers are facing great challenges in their supply chain from the continued impact of COVID-19, which are creating labor component and chip constraint in their supply chains and extending towards delivery lead time for both advanced and mature nodes. TSMC is working closely with our suppliers and taking several actions to do our part to the supply chain challenges. We have increased regular high-level communications to trace the progress. We have sent several teams on-site to support our suppliers and are working closely with them to identify critical chips that are gauging the tool delivery. We are working with our customers to prioritize our wafer capacity to support those critical chips to help mitigate the chip constraint issue. By taking such actions, we do not expect any impact to our 2022 capacity plan, and we continue to work closely with our suppliers on 2023 and beyond so that we can ramp-up our capacity to meet customers’ demand. Now I will talk about the materials supply update. TSMC operates a well-established enterprise risk management system to identify and access all relevant risk and proactively implement risk mitigation strategies. In terms of material supply, TSMC’s strategy is to continuously develop multi-source supply solutions to build a well-diversified global supplier base and to improve the local supply chain. For specialty chemicals and gases, including neon and geon we source from multiple suppliers in different regions, and we have prepared a certain level of inventory stock on hand. We are also working closely with our suppliers to further strengthen the resilience and the sustainability of our supply chain. Thus, we do not expect any impact on our operations from materials supply. Finally, let me talk about the N3 and N3E status. Our N3 technology will use FinFET transistor structure to deliver the best technology maturity, performance and cost for our customers. Our N3 schedule is unchanged, and we’re on track for volume production in second half of 2022 with good year. We expect the ramp of N3 to be driven by both HPC and smartphone applications. We continue to see a high level of customer engagement at N3 and expect more new tape-outs for N3 for the year as compared with N5 and N7. N3E will further extend our N3 family with enhanced performance, power and yield. We also observed a high level of customer engagement at N3E, and volume production is scheduled for 1 year after N3. Our 3-nanometer technology will be the most advanced foundry technology in both PPA and transistor technology when it is introduced. In terms of profitability, the initial outlook for new node is always challenging. And the increasing process complexity of leading nodes such as the N3 bring even greater challenges to achieving the corporate average gross margin in 7 to 8 quarters, particularly as our corporate profitability has improved with long-term gross margin target of 53% and higher. As we have done at prior nodes, we will continue to work diligently with our cost improvement and reducing our effort to ensure that we earn the right profitability and return on N3. With our technology leadership and strong customer demand, we are confident that our N3 family will be another large and long-lasting node for TSMC. This concludes our key message, and thank you for your attention.
Jeff Su: Thank you, C.C. This concludes our prepared remarks. Should you wish to raise your question in Chinese, I will translate into English before our management answers your question. Now let’s begin the Q&A session. Operator, can we please proceed with the first caller on the line?
Operator: Yes. The first one to ask question is Bruce Lu from Goldman Sachs.
Bruce Lu: Congratulations for the great result. I think the first one is still focused on the macro and inflation concern. How does TSMC evaluate the impact from the inflation and the geopolitical tension? We understand that TSMC worked with customers closely, but most of your customers probably don’t have the full picture of end demand fluctuation. At the same time, TSMC has beared the risk to build capacity a couple of years ahead to make the decision earlier, so how can TSMC provide more color to strengthen the investor confidence? Do we have any changes on our multiyear capacity expansion plan?
Jeff Su: Okay. Bruce, please allow me to summarize your first question. I think Bruce’s question is related to the macro environment and inflationary concerns. He wants to know how do we evaluate the impact from inflation and macro environment. And also in terms of our capacity, our customers may not have the full clear picture of end demand but TSMC has to bear the risk of building the capacity multiple years ahead of time. And will the CapEx amplify our volatility, so he wants to know, if there’s any color on what keeps basically management confident for the CapEx plan and color to strengthen investors’ confidence in our CapEx.
C. C. Wei: Bruce, this is C.C. Wei. Let me answer your question. As you said, TSMC works closely with our customers to plain capacity. And our CapEx and capacity expansion plan are actually based on customers’ long-term demand profile, underpinned by the industry megatrend. We do not build capacity based on speculation. In advanced technology node, we have a leading position. In our mature node, our capacity is built to support customer demand for our differentiated specialty technologies. And we focus on building effective capacity, which is capacity that products and produce the specialized technology with high yield rather than just plain capacity. Thus, we are confident our capacity is built to support our customers’ growth, and our utilization and profitability will be sustained.
Jeff Su: And then also, how do we -- I think the impact of inflation.
C. C. Wei: Well, the inflation definitely impact the consumers’ buying pattern. But let me stress then on overall demand, under the inflation environment, while the momentum in certain end market segment may slow down or adjust in terms of device units, other end market segment remains strong. In fact, we expect our HPC platform to be TSMC’s strongest growing platform in 2022 and the largest contributor to our growth, fueled by the structural megatrend driving increasing need for greater computation power and energy-efficient computing. But then more importantly, the increasing silicon content in end devices such as 5G smartphones, PCs, servers, networking and automotive applications are a much more important factor in supporting our strong semiconductor demand. And with our industry-leading technology, we are well positioned to capture all the opportunities.
Jeff Su: Okay. Bruce, does that answer your first question?
Bruce Lu: Yes. Okay. I want to go for the second question. I think in the prepared remarks, I noticed that there was no mentioning about the N2 schedule. Both of your competitors accelerated their schedule for the next-generation transistor. Can you comment on TSMC’s status for the especially in performance and the ramp-up schedule?
Jeff Su: Okay. So I think Bruce’s second question -- Bruce, please allow me to make sure we got it is on the N2 schedule. He said that our competitors have commented on their N2 schedule, and Bruce wants to know what is our N2 plan?
C. C. Wei: Our N2 development is on track, including new transistor structure and progressing to our expectation. We expect our N2 delivery to be the best technology, maturity, performance and cost for our customers. And we are confident that N2 will continue our technology leadership to support our customer growth. And we still plan the production in 2025.
Bruce Lu: So the 2-year cadence remain unchanged for the N2?
C. C. Wei: It won’t.
Jeff Su: Okay. Thank you, Bruce. Operator, can we move on to the next participant, please?
Operator: The next one to ask question is Gokul Hariharan from JP Morgan.
Gokul Hariharan: My first question is on N3. Given we are less than 1 year from N3 mass production start, could we talk a little bit about how should we expect N3 revenues to be ramping up next year? Would it be similar to what we have seen with N5 and N7 with roughly about 10% of next year’s revenues being N3? And also, could you talk -- I think you highlighted that there would be a little bit more challenge to get N3 to profitability closer to corporate average given some of the moving parts. Could we elaborate a little bit more on that as well? That’s my first question.
Jeff Su: Okay. Gokul, please allow me to summarize your question. So Gokul’s question is really related to N3. He wants to know with the ramp-up of N3 what kind of revenue contribution can we expect. Will it be similar to the past patterns of N5 and N7 for about 10% of wafer revenue in the first year. And also, he would like to ask given C.C.’s comment about process complexity challenges, what is the profitability outlook for N3. Is that correct, Gokul?
Gokul Hariharan: Okay.
Jeff Su: Yes. Okay. Maybe Wendell can address.
Wendell Huang: Yes. Gokul, this is Wendell. It’s too early to talk about the revenue contribution as N3 will not begin volume production until second half of 2022 with revenue contribution starting 2023. In addition, as the structural demand underpinned by the industry megatrends is driving growth across all our nodes, the specific percentage of the new nodes as compared to the historical pattern may be less meaningful in the future. But overall, we are confident that our 3-nanometer will be the most advanced foundry technology when it is introduced. And with the strong customer engagement and tape-out activity, our N3 family will be another large and long-lasting node for TSMC, just like N5 and N7 families. Now about the gross margin, as C.C. said, the initial outlook for new node is always challenging. And the increasing process complexity of leading nodes such as N3 brings even greater challenges to achieving the corporate average gross margin in 7 to 8 quarters, and partially also because our corporate profitability has increased and our new long-term gross margin target of 53% and higher. Now it is a bit early to say when N3 can reach the corporate average gross margin at this stage because the volume production hasn’t started yet. However, we will continue to work diligently on selling our value and cost improvement to ensure that we earn the right profitability and return. Now even considering the increasing process complexity of advanced nodes such as N3, we believe our technology leadership, manufacturing and capacity support and ability to earn our customers’ trust will enable us to earn a long-term gross margin of 53% and higher.
Gokul Hariharan: Got it. My second question is on the more mature process technologies, could TSMC give us some view on the industry growth for specialty and mature technologies? I think based on the data we look at, historically, that has only grown at maybe low to mid-single digit. But right now, we see a lot of capacity being announced from many foundries in these older specialty and mature process technologies, let’s say, defined as 28-nanometer and above. So could TSMC talk a little bit about growth rate for these mature process technologies going forward? Is it going to be materially higher than the 3% to 5% that we have seen in the past? In most cases, we have seen older nodes grow for 4 to 5 years and then kind of stagnate. Do we see that pattern changing because of some of the content per box or content per device dynamics that you talked about? Yes.
Jeff Su: Okay. Gokul, let me summarize your second question. I think your second question is -- Gokul’s second question is on the mature node and the outlook -- growth outlook for mature notes. His question is, how do we see the growth outlook at mature nodes? In the past, it has grown, in his words, about 3% to 5%. Do we think it can be materially higher than that on the mature nodes, which he defines as 20-nanometer and above?
Wendell Huang: Okay. Gokul, we forecast the growth rate of the overall semiconductor ex memory industry to accelerate to high single-digit percentage level in the next 5 years as compared to around 4% CAGR in the past 10 years. The higher demand at mature nodes will be driven by structural factors, such as an increase in long-term demand for certain specialty technologies due to the multiyear industry megatrends of 5G and HPC and increasing silicon content in many end devices as well as the acceleration of digitalization. TSMC’s strategy at mature nodes is to work closely with our customers to develop specialty technology solutions to meet their requirements and create differentiated and long-lasting value to customers. We believe our differentiated specialty technologies will enable us to capture the structural demand generated from the industry megatrends and continue to support our customers’ growth.
Jeff Su: Gokul, does that answer your second question?
Gokul Hariharan: Yes.
Jeff Su: Okay. Thank you, Gokul. Operator, can we move on to the next caller, please?
Operator: Next one to ask question, Charlie Chan from Morgan Stanley.
Charlie Chan: Congratulations for the great results, management. My first question is about the semi inventory debate. So may I clarify with C.C. that the company still believe that supply chain need to keep high inventory for several reasons. But in fact, we are seeing that PC, smartphone OEMs, they’re working down channel inventory even, as you know, that the they are working down the channel inventory. So do you think that the high inventory is actually a signal of a weaker demand? Or anything that we miss here because, in fact, we are seeing consumer tech inventory, we are seeing a correction?
Jeff Su: Okay. Charlie, let me summarize your first question. So Charlie’s question is on inventory and end demand. He wants to know or he notes that the consumers -- parts of the consumer end demand seem to be weaker or softer than expected. And so how does this also affect our view on the higher level of inventory, sort of our view? I guess, Charlie, your question is really what is our view on the end demand given potential weakness in consumer end market segments? And then what is our view on inventory. Is that correct?
Charlie Chan: Yes. Yes. And if the demand is indeed deteriorating, do you think the actual inventory level should come down?
C. C. Wei: Charlie, this is C.C. Wei. You are right, some of the end market segment, actually, we start to see a little bit soft in these days for those smartphone, PC or tablets, load. But as I indicated, other end market segment remain very strong, all right? And so if you look at some of the imbalance in the supply chain, particularly in the MCU or the power managed IT side, we still see very strong demand. And also because of those kind of supply chain disruption by the emerging COVID-19 uncertainty, so we are continuing to observe that our customer will maintain a higher level of inventory for a longer period of time. We continue to observe that. And as a result, actually for TSMC, we -- our capacity remain very tight throughout the whole year of 2022.
Charlie Chan: I see. Okay. So is it more specific to those industrial automotive industry inset for consumer tech? Am I right about your comments about inventory level?
C. C. Wei: Yes, you are right. In fact, the very important thing is a structural megatrend. So for the great -- you know that my customer require a greater computation power and energy-efficient computing and which is actually the strong point of TSMC’s technology.
Charlie Chan: I see. And my second question is about your N3 progress. So we continue to hear a lot of good news and anecdotes about your N3E is actually progressing very, very well. So do you think there is a possibility that you could actually pull in your N3E for maybe 1 or 2 quarters to address the customers’ demand, right? So I think it could be a win-win for both TSMC and your customers. Do you see that kind of a possibility and maybe convert some N3 projects to N3E earlier?
Jeff Su: Okay. So Charlie’s second question is on N3E. He notes the progress is going very well. So his question is, is there a possibility to bring in the timing of N3 to earlier? And will we convert N3 capacity to N3E?
Charlie Chan: Exactly.
C. C. Wei: Okay. Charlie, you are right again. I mean that our N3E result is quite good. And the progress is actually -- is ahead of our schedule. And pull in, yes, we are considering that. So far, I still did not have a very solid data to share with you that how many months we can pull in. But yes, it’s in our plan. And also the capacity, since we have a very strong demand on the N3 and N3E, we are still planning to have enough capacity to support our customer.
Jeff Su: All right. Thank you, Charlie. Operator, can we move on to the next participant, please?
Operator: Next one to ask question is Randy Abrams from Credit Suisse.
Randy Abrams: My first question, I wanted to follow up on your changed outlook where you took up from mid- to high 20s to now high 20s or above. Could you discuss because it is in light of the macro and the softening you’ve seen on consumer? Could you discuss the factors for the change if -- how much might be attributed to market share technology or how much to a certain platform? If you could give an update on your view of the different platforms if certain platform drove it? And did you see any downward change on any of the 4 platforms?
Jeff Su: Okay. Thank you, Randy. So let me summarize Randy’s first question is about our full year outlook, which as C.C. mentioned in his key messages that we expect to be at -- likely to be at or exceed the high end of our guidance of mid- to high 20s. So Randy’s question is, what is driving the higher or better full year outlook given the macro environment looks a bit more shaky. Is it technology? Is it market share, et cetera? And what is the outlook by platform?
C. C. Wei: Randy, we expect our HPC platform to be TSMC’s strongest growing platform this year and the following years. And it will be the largest contributor to our growth. And this is all because of a structural megatrend driving increasing need for greater computation power and energy-efficient computing. As I said, these kind of technologies happen to be TSMC’s strong point. So that all I can share with you is that we have confidence that it will be exceed or at on the high end of our guidance.
Randy Abrams: Okay. And a follow-up just on the first. Did you change your view on...?
Wendell Huang: Yes, and then also... .
Randy Abrams: Yes, so I wanted to know the other platforms, and if you take your view on .
Wendell Huang: Now for this year, Randy, we can share with you that we expect HPC and automotive to grow faster than the corporate average. IoT, similar. And smartphone, approaching the corporate average.
Jeff Su: For the full year.
Wendell Huang: For the full year.
Jeff Su: Yes.
Randy Abrams: Okay. So it sounds like not much change. My second question is more tied to -- there’s a lot of fear about do we head into the downturn or a slowdown. If you can give the other way in terms of flexibility on expansion plans, if hopefully we don’t, but if we go into a more of a recession, how much flexibility with your fab plants across U.S., Taiwan, Japan and Nanjing? And on the other side, with the prepayment in deposits, is there flexibility on timing of shipments, full flexibility for customers if they need to respond to a slowing demand?
Jeff Su: Okay. So Randy’s second question is about if there’s a downturn or a slowdown, will this change? Or how flexible is the timeline for our new fab and capacity expansion plans whether in Taiwan, Japan and overseas if the outlook changes for the worse? And what is the flexibility of our prepayments with customers if there was a downturn or slowdown?
C. C. Wei: Randy, this is C.C. Wei. Our CapEx and capacity expansion plan are always based on our customers’ long-term demand profile. This is underpinned by an industry megatrend. As long as the mega trend continues, which we believe it will, we will continue to invest to capture the growth that will follow. So even a short term with the possibility of downturn, which we don’t think it will impact too much to TSMC, if even it happens, we will continue our plan and we have confidence to invest to capture the growth that will follow.
Randy Abrams: Okay. And on the customer side for their -- the deposits and capacity they’re locking in?
Wendell Huang: Randy, actually, we believe signing contracts to guarantee the loading in the future is not a common practice. We focus really on technology leadership, manufacturing excellence and earning customer trust as a more effective way to secure customer commitments. Now we work closely with our customers to plan the capacity, including receiving their prepayments for capacity support. And we will continue to work with them to determine the best way to support them.
Jeff Su: Yes, Randy. So I think the answer for customer side and capacity side is pretty aligned or similar. Does that answer your second question?
Randy Abrams: Yes. I mean, I guess, just like in the past, it was the flexibility like we saw the slowdown in utilization. So I mean I would think it’s still work with customers on their plans if they need to reschedule because we’ve seen in the past like if they have to adjust their utilization. Like I don’t know if anything’s changed in the model on that element?
Wendell Huang: No, no, nothing changed in the model. Yes.
Jeff Su: Okay. Thank you, Randy. Operator, can we move on to the next caller, please?
Operator: Next one is Sunny Lin, UBS.
Sunny Lin: Congratulations on the strong performance. So my first question is on the pricing strategy for you going forward. I mean if we look at this up-cycle, the tight supply and the strong restocking demand has supported pretty meaningful price increase for foundry industry and TSMC throughout 2021. So from here, would you look to further raise price for some of the technologies to justify rising cost of expansion? And on the other hand, if the supply demand start to normalize, do you think there could be any risk to pricing?
Jeff Su: Okay. So Sunny, let me -- please allow me to summarize your first question. Her question is on pricing on both sides sort of in an up-cycle. But as we face cost challenges, will TSMC consider to further raise the price. And then on the flip side, on the other hand, if demand were to soften, I think, Sunny, you -- on the other hand, was will there be any risk to pricing to lower price. Is that correct?
Sunny Lin: That’s right.
C. C. Wei: Okay. Sunny, this is C.C. Wei. We do not comment on our pricing detail. But let me assure you that our pricing strategy is strategic, not opportunistic or short term. And customer understands our effort to support their growth. As you said that if there is a downturn coming and on the flip side, the TSMC going to drop our price, the answer is no. Did I answer your question?
Sunny Lin: That’s very helpful. So my second question is to follow up on the N3 ramp-up. So just trying to get a bit of a color on 2023. I understand the demand is pretty robust. But when we think about the potential revenue contribution for 2023, with the less equipment supply and delivery time, would that be a capping factor for 3-nanometer to exceed the typical 10% revenue contribution for next year? Or do you think there’s still some time for you to try to accelerate the equipment expansion?
Jeff Su: Okay. So, Sunny’s second question is on N3 and the ramp-up. Her question once again is sort of around the revenue contribution of N3. And specifically, she is asking whether the equipment supply or some of the tool delivery issues would affect the ramp-up of N3 in next 2023 and, thus, the revenue contribution.
C. C. Wei: Well, we did see some of the issues on the tool delivery and we are still working on it. As I said in the statement, we are working on 2023 right now, and we hope that we won’t have any big issue. But right now, we are not ready yet to share with you that how much we can resolve the issue. But we have strong demand. We try to build enough capacity for our customers. And we are working with our equipment supplier to get enough tool to expand our capacity.
Jeff Su: Okay. Thank you, Sunny. Operator, can we move on to the next participant, please?
Operator: Next one to ask questions, Rick Hsu from Daiwa.
Rick Hsu: Yes. My first question is regarding your revenue guidance for this year. I think you think that it should be at or even exceed your mid- to high 20s guidance in U.S. dollar terms. So in that case, are you revising your forecast for the global semiconductor ex memory for this year and also the global foundry market forecast for this year?
Jeff Su: Okay. Rick’s first question is about our 2022 outlook. Sorry, Rick, let me try to summarize. So Rick notes that C.C. said, our 2022 growth will likely be at or exceed the high end of our revenue guidance of mid- to high 20s. So he wants to know what does this mean for our forecast or expectation for the semiconductor ex memory and foundry markets.
C. C. Wei: So let me answer your question. So far, we are confident on TSMC’s performance. But the whole industry, semiconductor’s foundry industry remain that it will be around 20% year-over-year as a growth. All others, we are still trying to understand the status and not very ready to share with you yet.
Rick Hsu: Okay. So basically, the strength is more TSMC company specific, right?
C. C. Wei: That’s because our dealership in the technology, and you are right.
Rick Hsu: Okay, great. C.C., and second question, I think your customers have been waiting in the long queue since last year. And I know this year, there’s some macro issues, there’s some change and you mentioned some demand slowdown. But some others still very strong. So I assume for any customers releasing capacity will be quickly filled up by others. But are you saying the queue is shortening? Or if that’s the case, when do you think the queue -- there’s no more queue? When do you think that will happen?
Jeff Su: Okay. So Rick’s second question is about the -- C.C. mentioned that our capacity will remain tight throughout 2022. But C.C.’s -- sorry, Rick’s question is more about the queue or the line to wait because, as we said, certain end market segments may slow down or adjust, but others remain strong. Rick’s question is really is that wait or list line shortening, or when do we expect that to shorten?
C. C. Wei: Rick, so far, as I said, TSMC’s capacity will be very tight, not enough to support our customers. So if you ask whether the list in the queue will be longer was smaller, it doesn’t matter. It’s still just not enough to support our customers. And we are working very hard to support them. That’s what I can share with you.
Jeff Su: Okay. Thank you, Rick. Operator, can we move on to the next participant, please?
Operator: Next one online Brett Simpson from Arete Research.
Brett Arete: Yes. I had a question on your overseas fab expansion plans. I guess today, if we look at your wafer capacity, it’s 100% in Taiwan. Are you seeing any pressure from your strategic customers to accelerate your overseas plans for fab expansion? And can you also share with us if you have a target for what portion of your wafer capacity long term might come from your overseas fabs? And in what time period might that happen?
Jeff Su: Okay. So Brett’s first question is about our overseas expansion and global manufacturing footprint. His question is that, are we seeing any pressure from strategic customers to expand overseas? And he wants to know what proportion or percentage of our capacity will be overseas by what time frame?
C. C. Wei: Okay. Let me answer the question. In fact, talking about the overseas supply or the capacity we are building, our responsibility as TSMC’s management is to make the best decision for our customers and in the best interest of TSMC. And we are in close and constant communication with all of our customers. And so far, actually, their priority are securing capacity, enough capacity to support their business and also working with TSMC on technology development. That’s TSMC to focus on. And for the how much of the capacity to build out site, let me share with you, right now, we have fab in Arizona with 5-nanometer, a fab in Japan which are 28 and 16 FinFET technology and expanding our capacity in China with 16 FinFET and 28. Also, we’re building in Taiwan for 28 nanometers more capacity. We definitely have some future plan, but while increase in the next several years, but not enough to share with you say how many percentage in total were compared with TSMC’s technology. Does that answer your question?
Brett Arete: Yes, that’s great. And maybe just a second question. On -- you mentioned N3E is coming 1 year after N3. But you can give us an update around timing of 2-nanometer, which I believe is going to have a new transistor architecture gate all around. I guess the move from N5 to N3 was more than 2 years, which is what you’ve typically been -- that cadence you’ve typically been running at. Are we going to get back to 2 years with N2, between N3 and N2, so that we’ll see an end of 2024 introduction for N2? Or will it take longer?
Jeff Su: Okay. So Brett’s second question is really on N2 and the cadence. He wants to know that N5 to N3 is about more than 2 years cadence between those 2 nodes. For N3 to N2, will it be back on a 2-year cadence? And what’s the time frame for N2?
C. C. Wei: Brett, our progress so far today for the N2 is on track. And all I want to say is, yes, at the end of 2024, you will enter the risk production. 2025, it will be in production, probably close to the second half or the -- or the end of 2025. That’s our schedule.
Jeff Su: All right. Thank you, Brett. Operator, can we move on to the next participant, please?
Operator: Next one, we have Laura Chen, KGI.
Laura Chen: My first question is about the advanced packaging development. Can you share with us your view on TSMC’s current progress in advanced packaging in terms of the revenue contribution and the growth trend? And since we know that there are a lot of high computing PC clients relied on TSMC advanced packaging or 3D packaging service, so can we expect your advanced packaging revenue will be kind of part of your high computing PC growth outlook? That’s my first question.
Jeff Su: Okay. So Laura’s first question is on our 3D IC or advanced packaging progress. She wants to know the progress in terms of the revenue contribution, the growth outlook for the packaging business and how correlated is it to the high HPC platform.
Wendell Huang: Right. Lauren, let me answer the first part. In 2021, the advanced packaging generated $4.1 billion of revenue. Now we expect that this year, the growth will be similar to the corporate growth. And during the 5-year -- in the next 5 years, we expect its growth in CAGR will be slightly higher than the corporate.
Jeff Su: And the correlation with HPC?
C. C. Wei: Well, let me answer that correlation. Actually, very advanced SoICs technology actually serve for the HPC high-end applications. So that required high bandwidth and very low power and very high performance. And so far, we just entered a small volume of the production in 2022 and we expect this one will continue to grow. That’s what we have today.
Laura Chen: Okay. That’s very clear. And my second question is more like a follow-up. I think C.C. already mentioned a lot about the strategy of the CapEx expansion in longer term. But we know that the equipment lead timeline has been quite longer. So I’m just wondering any specific area or process you are seeing the biggest impact? And what’s your action accordingly? Or do you have any priorities for various technology nodes?
Jeff Su: Okay. So Laura’s second question is about capacity expansion and equipment lead time. Given the tool delivery that C.C. talked about, she wants to know what areas or nodes are we seeing the biggest impact? And are we prioritizing -- how are we prioritizing this?
C. C. Wei: Laura, I mean that’s -- we see this kind of tool delivery problem unexpectedly from beginning of this year. And we are working very hard with our tool suppliers to resolve all the issues. And so as for which technology node or which technology or what are being impacted, all the leading-edge technology and mature node technologies capacity expansion are being impacted. And certainly, in order to support our customers’ strong demand, we’re working very hard for the tool suppliers to resolve all the issues. And so far, 2022, no problem. We’re working on 2023 and beyond. I hope a few months later that we can report that the issue will be resolved. But we’re still working very hard with our suppliers and to resolve all the issue. That’s all I can say right now.
Jeff Su: Okay. Thank you, Laura. Operator, can we move on to the next participant, please?
Operator: Next one to ask questions, Mehdi Hosseini from SIG.
Mehdi Hosseini: Yes. My first one has to do with better understanding demand dynamics. You highlighted better than average growth from HPC. And in that context, I’m just wondering how I should think about the mix of 5 and 7-nanometer node by year-end ‘22 or second half of ‘22?
Jeff Su: Okay. So Mehdi’s first question is looking at the demand and also by node, he wants to know how should he expect the contribution or the mix from N5 and N7 in the second half of this year.
C. C. Wei: It will be greater than we just reported of 50%, right? I mean for the second half of this year, the contribution to TSMC’s revenue were greater than 50%, combining 7 and 5 together.
Mehdi Hosseini: Okay. I was just trying to better understand how that increase would look like compared to prior years where in the second half, usually the advanced node contribution increases and with the leap in mix. I was just trying to better understand how the second half of ‘22 will look like in the past prior years.
Wendell Huang: Yes. Mehdi, I think that the second half revenue is normally higher partially because of seasonality of some of the products.
Mehdi Hosseini: Okay. Great. And one more follow-up. And thank you so much for the color on the next technology migration of 2-nanometer. You highlighted the transistor change. But I also want to understand what is underlying assumption, especially as it relates to lithography. We also have another change coming up as going from EUV to high NA. And I’m just curious to know if you are assuming if you will be using EUV, or you would need high NA as you go into HBM for 2-nanometer in the second half of ‘25?
Jeff Su: Okay. So Mehdi’s second question is on N2, a very specific question. He wants to know with N2, there’s a change in transistor structure. He also wants to know on the lithography side, will we be using EUV or high NA, correct, Mehdi?
Mehdi Hosseini: Yes.
C. C. Wei: Well, let me answer the question. We are the largest user of EUV tool today in the industry. And so we have intensively evaluated and are very familiar with those high-end EUV tools for wire. And we will continue to evaluate and adopt the high-end tool whenever we think is necessary and is ready and cost effective. Whether it is a N2 or not, I have not yet to be able to share with you.
Jeff Su: Okay. Thank you, Mehdi. Operator, can we move on to the next participant?
Operator: Next one to ask questions, Charles Shi from Needham & Company.
Charles Shi: I want to ask my first question a little bit longer term. One of your IDM customers, well, I don’t want to call the name. But their CEO, I believe, revisited you twice over the last 6 months. They think they can both buy wafers from you and, at the same time, compete with your technology. And they are hoping in 2025 and beyond, we’ll compete with you in the foundry business. So there has been concerns that you may not really get a fair deal out of this a little bit of complex relationship. One concern, very specifically, I heard this that you may end up basically teaching this competitor, enabling their accelerated road map. But in the end, they will break away from you and compete against you, especially in the foundry business. So maybe can you address this concern and provide us some high-level thinking to the investor community and the public?
Jeff Su: Okay. Charles, let me summarize your first question. His first question is on the IDM customer that wants to buy wafers or outsource to TSMC, but also said that they would like to compete in the foundry industry. So Charles, your question is really, I guess, 2 parts in the sense that how will TSMC end up teaching this IDM and enabling the road map? And how will we compete on the foundry side?
C. C. Wei: Well, Charles, let me answer the question first on the competition. As a leading pure-play foundry, TSMC have never been short on competition in our 35-year history. And we know how to compete, all right? And you asked about how to protect the TSMC’s IP or technology detail. In fact, we have a well-established process and design enablement system to ensure a productive engagement with all our customers and while we can protect our own IP as well as customers’ IP. We do not anticipate any issues at all. And for the future, actually, these are IDM -- I take back, they are business back into their own house. We have already taken this into our capacity planning consideration already. Did I answer your question, Charles?
Charles Shi: Yes. C.C., so maybe really just to follow up, the second question and then actually is a follow-up to my first question. There has been some press reports, I believe, over the last 2, 3 months saying TSMC is building -- potentially building a dedicated fab for this particular customer. I’m not sure if dedicated fab or production line for specific customers is really TSMC’s standard practice. However, can you kind of provide your thinking? Would the answer be no, even if like this customer is going to bring you a significant volume?
Jeff Su: Okay. So Charles’ second question is there’s been certain media reports saying that we will build a decade fab or production for certain IDM. Is this our practice? Or -- and would the answer still be no even if there is large volume behind such a dedicated capacity?
C. C. Wei: Well, Charles, to be frank with you, our capacity planning, as we said many times, is based on the long-term market demand profile, underpinned by the industry’s megatrend of 5G and SPC and the semiconductor content enrichment in many young devices. We are not dependent on any single customer or product. Did I answer your question?
Charles Shi: Yes.
Jeff Su: Okay. Thank you, Charles. Operator, in the interest of time, I think we’ll take the last 2 participants’ questions, please.
Operator: Okay. And the next one to ask question is Krish Sankar from Cowen & Company.
Krish Sankar: I had 2 of them. The first one is for Wendell. In the March quarter, there’s quite a big difference between the revenue growth and the shipment growth. So I’m kind of curious on your full year guidance of high 20s or even beyond that for revenue growth, how much is coming from pricing? Any color there would be helpful. And then I had a follow-up for C.C.
Jeff Su: Okay. So, Krish’s first question is in looking at our full year outlook. He wants to know how much of our growth this year, how much of it is coming from price versus volume, I guess?
Wendell Huang: Yes. Krish, volume, price and product mix are important contributing factors in driving our growth. But we do not have a specific breakdown to share with you.
Krish Sankar: All right. No worries. And then I had a follow-up for C.C. Clearly, investors seem to be worried about a recession or a slowdown. So C.C. from your experience, when you look at price cyclical slowdowns or even macro corrections, what are the leading indicators TSMC looks for specifically? Is it a pricing slowdown? Is it pushed out of capacity? Is it customers breaking LTAs? What do you think is the first shoe to drop? Any color there would be helpful.
Jeff Su: Okay. Krish’s second question is in terms of looking at, again, the demand environment. He wants to ask C.C. and based on past recessions or slowdowns, what are some of the leading indicators that we watch for to -- as a signal? Do we look at pricing slowdown? Do we look at slowdown in capacity and CapEx? What are the indicators that we look at?
C. C. Wei: Krish, this is a tough question to be asked because we always in close working with our customers. So we know that each customer’s demand and their forecast and we plan our capacity, we plan our technology by working with them. So if there is a downturn, sure, we’ve got the firsthand information from our customers. And we collect them together, and we do get it. And we decide our long-term CapEx and capacity. But which one is a leading indicator, that, I don’t have a specific answer for your questions.
Jeff Su: Okay. Thank you. Operator, we’ll take the questions from the last participant, please then. Thank you.
Operator: Yes. The last one to ask question is Rolf Bulk from New Street Research.
Rolf Bulk: At the beginning of the year, you guided for advanced processes to account for 70% to 80% of CapEx and specialty nodes for 20%. Now with the year now underway and you’re having better visibility on the demand in your different end markets, can you share with us if you’re thinking on capacity additions of advanced versus specialty have changed? Or whether those ratios that you gave originally still hold?
Jeff Su: Okay. Rolf’s first question is about our CapEx and CapEx spending. His question is with the -- in the past 3 months, has the allocation or breakdown between events and specialty technologies in terms of our CapEx, has that changed?
Wendell Huang: No, no, it has not.
Rolf Bulk: That’s helpful. Now as a follow-up, you mentioned that you’re working with suppliers to secure and further diversify your material supply. Can you discuss whether you expect your material input cost increase in the second half of the year? And how we should think about gross margin in the second half of 2022 in that context?
Jeff Su: Okay. So Rolf’s second question is a little bit on materials cost. We have said that we’re diversifying our material supplier. So are we seeing the input cost increase? And then what does this mean for the margin outlook in the second half?
Wendell Huang: Yes. Well, let me answer that. Yes, we do face manufacturing cost challenges, partially due to the rising materials inflationary cost. But we always work closely with our customers to provide our value. And we will continue to ensure that the pricing strategy reflects the value creation. We will also work diligently in our fab operations and with our suppliers to deliver on cost improvements. So by taking such actions, we believe we can achieve the long-term gross margin of 53% and higher and earn greater than 25% ROE through the cycle. That will enable us to invest to support our customers’ growth and to deliver profitable growth for our shareholders.
Jeff Su: Okay. Rolf, does that answer?
Rolf Bulk: Very helpful.
Jeff Su: Yes. Thank you, Rolf. Okay. So thank you, everyone. This concludes our Q&A session. Before we conclude today’s conference, please be advised that the replay of the conference will be accessible within 1 hour from now. The transcript will become available 24 hours from now, both of which will be available through TSMC’s website at www.tsmc.com. Thank you for joining us today. We hope everyone continues to stay healthy and safe. And we hope you will join us again next quarter. Goodbye, and have a good day.
Related Analysis
Taiwan Semiconductor (NYSE: TSM) Leads in the Semiconductor Industry with Strong Growth and Market Position
- Taiwan Semiconductor has seen a 64% stock price increase year-to-date, highlighting its significant role in the semiconductor industry amidst surging global chip demand.
- The company reported a 45% revenue increase in July, with analysts now forecasting a 37% growth rate, driven by the demand for AI technology.
- Despite a modest stock rise of 1.5% in July, the anticipation of the fiscal Q3 report suggests potential for further positive market adjustments.
Taiwan Semiconductor (NYSE: TSM) stands out in the semiconductor industry, not just for its remarkable 64% stock price increase year-to-date but also for its significant role in meeting the surging global chip demand. This demand is not only keeping the company in the spotlight but also setting it apart from competitors. As a leading chip manufacturer, Taiwan Semi's recent financial achievements, including a 45% revenue increase in July, highlight its strong market position and the high demand for its products.
The company's success is further emphasized by analysts' revised growth expectations, now forecasting a 37% growth rate for Taiwan Semi. This optimism is rooted in the increasing demand for artificial intelligence (AI) technology, which relies heavily on advanced semiconductor chips. Taiwan Semi's ability to meet this demand places it at the forefront of the AI technology wave, showcasing its importance in the tech industry's future.
Despite the significant revenue increase in July, the stock's modest 1.5% rise suggests that the market had already anticipated strong performance. However, this also indicates that if Taiwan Semi continues to outperform expectations, especially with the upcoming fiscal Q3 report, the stock could see further positive adjustments. This scenario underscores the company's robust position in the market and its potential for sustained growth.
Taiwan Semiconductor's crucial role in supplying the necessary components for AI technology development makes it a key player in the semiconductor sector. This "picks-and-shovels" approach not only secures its place in the industry but also attracts investor interest, looking to capitalize on the growth of AI and other advanced technologies. As the demand for these technologies increases, Taiwan Semi's strategic position and performance are likely to continue driving its success and making it a compelling choice for investors.
Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM): A Key Player in the Semiconductor Industry
- Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) is a leading manufacturer in the global semiconductor industry, known for its advanced manufacturing capabilities.
- The company's financial performance, technological advancements, and strategic position in the semiconductor supply chain are driving investor interest on platforms like Zacks.com.
- TSM's commitment to innovation and its ability to meet the growing demand for semiconductors position it as an attractive investment opportunity in the tech sector.
Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) stands as a pivotal player in the global semiconductor industry, primarily known for its role in manufacturing chips for various tech giants. The company's recent traction on Zacks.com as a trending stock is a testament to its significant position in the market. TSM's operations span across the design, manufacture, and sale of integrated circuits and semiconductor devices, which are crucial for a wide range of electronic products. Its prominence is further highlighted by its client base, including leading technology firms that rely on TSM's advanced manufacturing capabilities.
The surge in interest towards TSM on platforms like Zacks.com can be attributed to several factors that investors are keenly watching. These include the company's financial performance, technological advancements, and its strategic position in the semiconductor supply chain. As the demand for semiconductors continues to grow, driven by advancements in technology and an increase in electronic device usage, TSM's role becomes increasingly vital. This growing demand places TSM in a favorable position to capitalize on the expanding market.
Moreover, TSM's ability to stay at the forefront of technology, with investments in research and development, ensures its competitive edge. The company's commitment to innovation allows it to meet the evolving needs of its clients, making it an attractive stock for investors looking for growth opportunities in the tech sector. The attention TSM is receiving on Zacks.com indicates that investors are recognizing these strengths and are considering the company's potential for future growth.
In conclusion, Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) is capturing the attention of investors for good reasons. Its pivotal role in the semiconductor industry, combined with a strong focus on technological advancement and a robust market demand, positions TSM as a stock worth watching. As the company continues to navigate the complexities of the global semiconductor market, its ability to maintain a competitive edge will be crucial for its ongoing success and attractiveness to investors.
TSMC Shares Rise 3% on Strong Q2 Sales Driven by AI Boom
Shares of Taiwan Semiconductor Manufacturing (NYSE:TSM) rose more than 3% on Wednesday following the company's announcement of increased second-quarter sales, driven by the ongoing AI boom and global investment in data centers.
TSMC, the sole supplier of Nvidia's and Apple's most advanced chips, reported June revenue of NT$207.9 billion. This contributed to a 40% growth in the June quarter, surpassing the average projection of a 35.5% increase.
The surge in orders for AI chips has helped mitigate weak smartphone sales, which are starting to recover. TSMC and other AI-related stocks have significantly boosted Taiwan's Taiex Index by more than 40% over the past year, despite ongoing US-China geopolitical tensions.
Barclays' Nicholas Campanella Predicts Potential Growth for TSM
- Barclays upgraded TSM to Overweight from Hold and increased the price target to $170 from $150.
- TSMC's strategic importance in the semiconductor industry is highlighted amidst geopolitical tensions and U.S. sanctions on Chinese AI chip companies.
- The company's stock has shown significant growth, with a year range from $84.02 to $160.78, reflecting its strong market position and demand for its manufacturing services.
On Wednesday, June 5, 2024, Barclays upgraded its rating on TSM (NYSE:TSM), also known as Taiwan Semiconductor Manufacturing Company, to Overweight, indicating a positive outlook on the stock's future performance. This decision reflects Barclays' confidence in TSM's growth potential, despite maintaining a recommendation to hold. The upgrade was accompanied by a significant increase in the price target to $170 from $150, suggesting that Barclays sees a strong upside for TSM's stock, which was trading at $152.47 at the time of the announcement.
Taiwan Semiconductor Manufacturing Company is a key player in the global semiconductor industry, providing essential manufacturing services to a wide range of clients, including major technology firms. The company's role is particularly crucial given the current geopolitical tensions and the impact of U.S. sanctions on Chinese AI chip companies. These sanctions have led several Chinese firms to adjust their strategies by designing less powerful processors to maintain access to TSMC's production capabilities. This situation underscores TSMC's strategic importance in the semiconductor supply chain and its ability to navigate complex international relations.
The recent developments highlight TSMC's resilience and adaptability in a challenging global market. The company's stock has experienced fluctuations, with a recent decrease of 1.60% bringing the price to $152.47. Despite this, TSM's stock has shown significant growth over the past year, with prices ranging from a low of $84.02 to a high of $160.78. This performance reflects the company's strong market position and the high demand for its manufacturing services.
TSM's market capitalization stands at approximately $680.87 billion, indicating its substantial size and influence in the industry. With a trading volume of about 9.94 million shares on the NYSE, TSM remains a highly watched and traded stock. The company's ability to maintain production for its clients, even in the face of geopolitical challenges, is a testament to its operational excellence and strategic foresight.
The upgrade by Barclays, along with the increased price target, suggests that analysts are optimistic about TSM's ability to continue its growth trajectory. The company's strategic importance, coupled with its strong financial performance and market position, makes it a key player in the semiconductor industry. As TSM navigates the complexities of international trade and technology development, its stock remains a focal point for investors looking for opportunities in the tech sector.
Taiwan Semiconductor Reports a Q1 Beat Due to Strong AI Demand
Taiwan Semiconductor Manufacturing (NYSE:TSM), the world's leading contract chipmaker, reported a robust profit for the first quarter, surpassing expectations due to rising demand from the burgeoning artificial intelligence sector.
TSMC announced a net income of T$225.49 billion for the quarter ending March 31, exceeding Wall Street projections of T$218.1 billion ($6.7 billion) and marking an increase from last year's T$206.99 billion. Earnings per share for the quarter were T$8.70, or $1.38 per American Depository Receipt, up from $1.31 the previous year.
However, the quarterly comparison showed a 5.5% drop in net income, suggesting a slight cooling in demand compared to the peak levels of 2023. The company is also facing rising costs as it ramps up investments in chip development, with capital expenditures climbing to $5.77 billion in the first quarter from $5.24 billion in the previous quarter.
Revenue for the quarter grew 16.5% year-on-year to T$592.64 billion, aided partly by a weak Taiwan dollar which enhanced dollar-denominated earnings.
This financial performance is particularly noteworthy as TSMC's results are often viewed as a barometer for global chip demand due to its critical position in the semiconductor industry.
TSMC Reports a Significant Jump in March Sales
Taiwan Semiconductor Manufacturing (NYSE:TSM) reported a significant increase in its March sales, attributed largely to the growing demand for chips fueled by advancements in artificial intelligence. TSMC's sales for March soared by 34% from the previous year, reaching T$195.21 billion ($6.1 billion), and saw a 7.5% rise from February's figures.
This surge led to a first-quarter total of T$592.64 billion in sales, marking a 16.5% increase year-on-year. It's important to note that this substantial growth was partly due to the low sales base in 2023, when TSMC faced weaker chip demand. The latter half of 2023, however, began showing signs of recovery, driven by AI-related demand.
As the world's leading contract chipmaker, TSMC supplies major tech companies, including NVIDIA Corporation and Apple. NVIDIA, in particular, has significantly contributed to TSMC's demand, thanks to the processor manufacturer's focus on AI-driven chip development. The heightened interest in AI has recently propelled TSMC's valuation to new heights, with plans underway to expand its major chipmaking facility in Phoenix, Arizona.
Taiwan Semiconductor Manufacturing Beats Q4 Results
Taiwan Semiconductor Manufacturing (NYSE:TSM), the world's leading contract chipmaker, announced its fourth-quarter revenue of T$625.5 billion ($20.10 billion). While this figure shows a largely flat performance, it has still managed to exceed market expectations. The reported Q4 revenue also went beyond TSMC's earlier projection range of $18.8-19.6 billion.
In December, TSMC observed a year-on-year revenue decrease of 8.4%, bringing in T$176.3 billion.
Commenting on these results, Wedbush analysts noted that this outcome aligns with previous expectations of a strong fourth quarter for TSMC. The performance was attributed to various factors, including seasonal demand associated with Apple, increased demand for AI solutions, and improved dynamics in the Chinese handset market.