[News] TSMC’s Advanced Processes Remain Resilient Amid Challenges

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As TSMC’s earnings call approaches on April 18th, according to a source cited in a report from Commercial Times, it has predicted a downturn in the smartphone industry as it enters a slow season. However, TSMC is reportedly benefiting from AI demand, bolstering its operations through HPC (High-Performance Computing). Additionally, the increasing revenue share from the 3nm process is expected to contribute positively to performance in the second quarter.

TSMC has issued updates for three consecutive days, indicating that the overall recovery rate of its fabs has exceeded 80%. They reiterated their annual performance outlook from January’s earnings call, forecasting revenue growth in the low-to-mid twenties percentage range for the full year. Notably, in the fourth quarter of last year, the revenue share from high-performance computing matched that of smartphones, both reaching 43%, serving as dual engines for operational growth.

The same report, citing sources, indicates that TSMC’s advanced process technology and yield rates lead the industry, making it the primary foundry choice for most global customers.

Based on overall market share, TrendForce’s latest report reveals that in 2023, global foundry revenues hit US$117.47 billion, with TSMC capturing a dominant 60% share. This figure is expected to climb to around $131.65 billion in 2024, increasing TSMC’s share to 62%. It is also estimated in the report from Commercial Times that TSMC holds a market share of approximately 70-80% in 5nm technology, and this is expected to exceed 90% for 3nm, covering nearly all major players in the market.

TSMC has also emphasized that besides traditional smartphone applications, High-Performance Computing (HPC) is becoming an increasingly important application for their advanced processes. This means that even during the second quarter when demand for smartphone chips is typically lower, it will be supported by HPC demand.

The current major AI accelerators such as NVIDIA’s A100 and H100 GPUs, AMD’s Instinct MI250 and MI300, are all manufactured utilizing TSMC’s 7nm or 5nm nodes, highlighting TSMC’s critical position in the AI industry. Reportedly, as demand for AI-based Generative AI (AIGC) continues to rise, TSMC’s production volume is also expected to increase accordingly.

According to the same report citing sources, TSMC’s utilization rate for its 3nm production remains high and unaffected despite the impact of the recent earthquake on its facilities. TSMC has emphasized that key machines used for advanced processes, including all Extreme Ultraviolet (EUV), were undamaged.

However, in areas where the shaking was more severe, certain production lines are expected to require longer adjustments and calibration to restore automated production. TSMC is conducting a comprehensive review of the impact of this earthquake while maintaining close communication with its customers.

Furthermore, TSMC’s biggest challenge at the moment is how to catch up with customer expansion demands.

The most lacking capacity currently is in CoWoS production. Although TSMC maintains its stance of doubling capacity compared to 2023, market estimates cited in the report indicate that TSMC’s capacity is expected to increase from around 13,000 wafers to 30,000-35,000 wafers. This aligns with what founder Morris Chang described—AI chip demand in the future will no longer be in the tens or hundreds of thousands of wafers but will require the capacity of 3, 5, or even 10 fabs.

Read more

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(Photo credit: TSMC)