This year’s TSMC revenue will set a record high for the company, thanks to high demand for chips and rising prices that customers are willing to pay for services. The company acknowledges that demand for chips for consumer devices is slowing, but demand for 5G, AI, HPC, and automotive chips remains stable. In fact, the main problem with TSMC today is the increase in fab equipment, as ASML and other tool companies report that demand for semiconductor manufacturing tools far exceeds supply.
Last week TSMC Post Results for the second quarter of 2022. The company’s sales reached a record $ 18.2 billion, up 43.5% year-over-year.Company clearly April and May sales increased 55% and 65.3%, respectively, while June sales increased only 18.5% year-on-year, indicating a slowdown in sales growth.
Demand for client devices slows
“As devices in the smartphone, PC, and consumer end-market segments soften, we confirm that the supply chain is already in action and expect inventory levels to decline throughout the second half of 2022.” Said TSMC CEO CCWei attended the company’s earnings call.
I can only speculate on this, but it seems that some TSMC customers have reduced their client-oriented chip orders after Russia launched a full-scale war with Ukraine in late February. TSMC charges / recognizes revenue when delivering chips / wafers to clients.
The chip production cycle with the latest process technology is well over 60 days, depending on the complexity and number of layers. N16 is about 60 days, N7 is over 90 days, and N5 is probably well over 100 days.These nodes 65% Of TSMC’s earnings. Therefore, if clients begin to reduce orders in March and April in anticipation of increased end-user inflation and uncertainty, the impact will be seen in June. This can be seen in the TSMC report.
TSMC acknowledges that demand for client-oriented chips is softening, but demand for chips designed to support 5G, AI, and HPC applications still exceeds the company’s supply capacity.
“Although the consumer end-market segment is softening, other end-market segments such as data centers and automotive are still strong,” Wei said. “We can redistribute the capacity to support these areas. Despite ongoing inventory adjustments, customer demand continues to exceed supply capacity. Capacity remains tight throughout 2022. Full-year growth is expected to be in the middle of 30 years.% In US dollars. “
Advanced nodes to maintain growth drivers, enhanced expansion
More than half (51%) of TSMC’s revenue comes from chips manufactured using advanced manufacturing techniques (N7 and thinner nodes). It’s not surprising because TSMC is one of two contract foundries that provides clients with such an advanced manufacturing process.
These technologies will become one of TSMC’s major growth drivers in the coming years, especially as more customers adopt the N7 and more advanced technologies. However, the increased orders for N7 / N6 and N5 / N4 mean that TSMC needs to increase the capacity of these nodes and the capacity of the nodes after N3. As a result, the company estimates that this year’s capital investment will reach $ 40 billion. $ 44 billion.
“The successful ramp-ups of N5, N4P and N4X, and the upcoming N3 ramp-ups will expand our customers’ product portfolio and expand the markets they can serve,” said the TSMC manager. “Macroeconomic uncertainty may continue into 2023, and our technological leadership will continue to move forward and support our growth. […] We believe that the basic structural growth trajectory for long-term semiconductor demand remains strong. “”
The world’s number one contract manufacturer of semiconductors is also to ensure capacity availability (because TSMC plans to increase capacity to 28 nm and special nodes by 50% by 2025) and higher density designs. It may have more features, which encourages customers to move from older nodes to 28nm and specialty technologies.
Not only does it require a huge investment to build additional state-of-the-art 28nm specialty capacities, but TSMC also needs to procure additional semiconductor manufacturing tools. It should be noted that the company needs all kinds of lithographic machines for them, regardless of whether TSMC is building new N3 node or 28nm / special technology capabilities. N3-enabled fabs require drywall tools, immersion lithoscanners, and EUV-enabled equipment. Without the required number of dry and immersion scanners, advanced EUV machines alone will not help. On the other hand, lithographic tools are not the only machines Fabs need.
Apparently, the demand for fab equipment is so high that TSMC will not be able to use this year’s capital investment budget and some purchases related to advanced (N7 and below) and mature nodes will be postponed until 2023. .. As a result, TSMC’s capital investment is at the lower end of the company’s forecast (about $ 40 billion) for the year, not because it doesn’t want to invest, but because it can’t invest in tools that aren’t available.
“Our suppliers are facing greater challenges in their supply chains, extending tool delivery lead times on both advanced and mature nodes,” Wei said. “As a result, we expect some of this year’s capital investment to be pushed out in 2023.”
ASML confirms quarterly booking record
Meanwhile, this week ASML, the world’s largest producer of lithography tools Post Sales in the second quarter of 2022 were € 5,431 million, an increase of 53% over the previous year. In the second quarter, the company supplied a total of 91 new lithography systems (up from 59 in the second quarter of 2021), 12 of which were EUV systems (up from 3 in the second quarter of 2021).
Perhaps more importantly, ASML’s new system has more bookings than quarterly sales, with net bookings totaling € 8.461 billion during the quarter. Meanwhile, ASML’s backlog is currently € 33 billion and will continue over the next few years. This is another confirmation that companies like TSMC find it very difficult to get new tools.
The backlog of the DUV machine is currently about 600 units, Product order lead time It’s been about two years now for the new DUV scanner. The backlog of EUV tools is well over 100. ASML, on the other hand, states that the PO lead-time indicators are not exactly related because they face supply chain and capacity issues. That is, partners need to build additional capabilities, and ASML needs to build additional capabilities (which takes time). You will be able to provide the tools you recently ordered.
ASML plans to ship 55 extreme ultraviolet (EUV) lithography scanners throughout 2022, but 15 EUV machines are so-called fast, so € 6.4 billion (€ 160 million / 1 per unit). We recognize the revenue of 40 EUV systems worth ($ 140 million). Shipment — A shipping process that skips some of ASML’s factory testing and final testing and formal approval is performed at the customer site (this is why revenue approval is postponed). The company also plans to supply 240 Deep Ultraviolet (DUV) litho tools this year. ASML expects to produce a total of 60 EUV scanners and more than 375 DUV tools in 2023.
Overview
Demand for chips for client / consumer devices has softened due to rising inflation and geopolitical uncertainties, but global megatrends such as 5G, AI, HPC and self-driving cars still exist. These require advanced system-on-chip, specialized load. Not so advanced things like processors and sensors. Therefore, TSMC is confident in the strong demand for chips over the next few years.
However, TSMC is not the only company expanding its manufacturing capacity, so there are challenges in meeting that demand. ASML’s backlog currently contains over 100 EUV scanners and about 600 DUV scanners. It will take several years to ship these machines. As a result, TSMC has trouble getting the tools it needs to build the additional capacity it needs. It’s unclear if the company has enough capacity to meet all the potential demands of the largest customers of N3, N4, and N5 nodes (Apple, MediaTek, AMD, NVIDIA, etc.), but in the end it’s a tool. The lack of affects everything that process technology.
