TSMC’s Revenue Outlook Brightens as Chip Demand Resurfaces

In 2023, contrary to expectations, the semiconductor industry did not experience a rebound in the second quarter. Even though inventory levels were nearing their lowest point in the fourth quarter, the overall economic conditions seemed to have dampened any prospects of an immediate recovery. However, with continued improvements in inventory management, a resurgence in the automotive market, and an explosion in demand for Artificial Intelligence (AI), Taiwan Semiconductor Manufacturing Company (TSMC) appeared poised for robust growth in 2024, outperforming the general market.

According to a report by DigiTimes, TSMC’s revenue decline for the entire year of 2023 is likely to be less severe than anticipated. This can be primarily attributed to a recovery in capacity utilization rates before the end of the year, with the first half of 2024 potentially seeing a return to above 80%. The market demand is mainly driven by a revival in end-device demand and the burgeoning needs of artificial intelligence, with key clients like Qualcomm, NVIDIA, and AMD expanding their wafer orders.

Another significant factor is the increasing share of TSMC’s revenue from advanced sub-7nm processes, priced over $10,000, alongside a rise in CoWoS packaging orders, bolstered by a strong US dollar. Apple, TSMC’s top client, plays a crucial role with its stable performance of the iPhone, coupled with various new releases of Macs and iPads. The launch of the 3nm process, with a price tag of $20,000, has significantly driven TSMC’s recent revenue surge.

Industry insiders indicate that by the end of this year, TSMC’s capacity utilization rate for 6/7nm processes could maintain at 70%, while the 4/5nm processes could approach 80%. The monthly production capacity for the 3nm process is estimated to be around 60,000 to 70,000 wafers, with expectations to increase to 100,000 wafers per month by the end of next year. However, it is important to note that the yield rate for TSMC’s 3nm process is relatively low, significantly impacting the gross margin, and this is expected to continue to exert pressure even into the next year.