Author | Yesterday
Last Thursday, TSMC, known as the "semiconductor weather vane", the wafer foundry leader, issued its first semiconductor earnings report, and its revenue, gross profit margin and net profit exceeded expectations. However, on the day of the earnings report, dragged down by the broader market, TSMC rose 2.7% from the opening to close down 3.09%. In fact, since the beginning of this year, affected by soaring inflation and interest rate hikes, the semiconductor sector as a whole has gone weaker than the broader market, reflecting the valuation problem of the sector on the one hand, and reflecting the market's expectations for the retreat of consumer electronics on the other hand.
As of the close of trading on April 18, 222, TSMC had risen by 12.1% in 21 years and -17.51% in 22 years so far, outperforming the gains of the S&P 500 Index (SPY: -7.5%) and the NASDAQ 100 ETF (QQQ: -14.78%) in the same period, outperforming the growth rate of the Philadelphia Semiconductor Index (SOXX: -21.84%) in the same period.
Overall, TSMC's 22Q1 revenue increased 35.5% year-on-year to NT$491.076 billion, a record high for eight consecutive quarters; benefiting from the previous price increase, the gross profit margin exceeded 55% for the first time to 55.6% (TSMC's long-term gross profit margin target was more than 53%); net profit increased by 41.3% year-on-year to NT$202.733 billion (estimated NT$186.06 billion, about 9% above expectations), and the diluted EPS increased by 45% year-on-year to NT$7.82.
By business, high-performance computing continued to grow at a high rate, accounting for 41% of total revenue, surpassing smartphones (40%) for the first time. High-performance computing will continue its strong growth trend in the future, and HPC is expected to bring more than NT$700 billion ($23.9 billion) in revenue to TSMC this year. Previously, it was reported that the packaging substrate and heat dissipation materials required by TSMC advanced packaging CoWos increased by about 3 times in 2022, which coincided with the replacement of new and old products of GPU leader Nvidia in 2022, and it was also reported that the annual growth of HPC chips in NVIDIA data center would be as high as 200%-250%, if the progress is smooth, the new product using the 5nm enhanced version is expected to come out at the earliest 22Q3, corresponding to the further improvement of TSMC HPC and 5nm revenue.
By process, advanced processes (5/7nm) accounted for half of total revenue, unchanged from the previous quarter. Since more manufacturers will enter the 5nm node in 2022, the proportion of revenue of the future 5nm process is expected to further increase: in addition to Apple, there are AMD (upgrading the Zen4 to 5nm process, the specific product is Ryzen 7000, as soon as September before the release), NVIDIA (RTX4000 series GPU, TSMC will monopolize all Nvidia 2022 GPU orders), Qualcomm (Snapdragon 8 Gen 1 action processor improved Snapdragon 8 Gen). 1 Plus was handed over to TSMC) and other leading semiconductor companies to join the ranks of process upgrades. According to industry chain news, TSMC's 5nm production capacity will increase by 25% from the previous 120,000 wafers/month to 150,000 pieces/month (the increase of 30,000 pieces is mainly for PC users, AMD and Intel will obviously benefit).
TSMC's 22Q1 shipments increased by 12.5% year-on-year to 377.8W wafers of 12 inches, and shipments will be further increased in the future with the gradual landing of new production capacity. According to SEMI, global semiconductor manufacturers will increase their monthly production capacity by 21% from the beginning of 2020 to the end of 2024 to a new high of 6.9 million wafers (8-inch equivalent wafers). After spending on 8-inch fab equipment climbed to $5.3 billion last year, fabs around the world continue to work together to overcome chip shortages, with fabs remaining at a high level of operation in 2022.
From the perspective of management guidelines, 3nm or will become the company's next revenue growth point: 3nm process (N3) is currently more than expected research and development progress, is expected to be put into production in the second half of 2022, the first batch of 3nm expected production capacity of 3-35,000 wafers / month; at the same time, the 3nm process family demand is strong, with high-performance computing (HPC) and mobile phone applications as the main source of orders, N3/N3E will have sufficient capacity support. In addition, the company plans to produce 2nm chips in 2025, and expects Q2 revenue to be $17.6-18.2 billion, with a gross margin of 56%-58%.
Despite the risk of consumer electronics retreating, the semiconductor boom is still driven by the increase in demand in HPC and automotive. The main risk points in the future will come from the ebb and flow trend of consumer electronics such as PCs, tablets and smartphones, but strong demand in the high-performance computing business and the automotive business will offset the seasonal changes in the smartphone-related business.
According to SIA, global semiconductor industry sales in February 2022 were $52.5 billion, up 32.4% year-on-year from February 2021 and the first time since the imbalance between supply and demand in the industry that the growth rate exceeded 30%. Overall, global semiconductor sales maintained a strong growth trend in February, having grown by more than 20% for 11 consecutive months, indicating that the semiconductor boom is still continuing.
Affected by the epidemic and other factors, semiconductor customers will maintain a high inventory level for a long time, so TSMC's production capacity will remain extremely tight in 2022. According to Susquehanna Financial Group, due to the global pandemic and the earthquake in Japan, the waiting time for semiconductor deliveries in March was extended again, an increase of two days from the previous month to 26.6 days. TSMC CEO also said that even if the economy declines, TSMC will not cut prices, ASP will remain stable, and future performance can still be expected.
In addition, TSMC said that the company's capital expenditure, expansion plan are based on the specific needs of customers, it is expected that this year's capital expenditure will not be affected, and the company's production capacity is very sought-after, continue to receive customer advances, a total or will reach NT$150 billion (about 34.65 billion yuan) and then reach a new high, throughout the two years of the spread of the lack of core tide, TSMC's advance payment has grown steadily. The overall industry still benefits from the strong demand in HPC, smart trams and other fields, so even if the short-term industry faces a cyclical decline, it still does not change the company's long-term optimistic attitude.