Crazy TSMC, earning 1 billion per day in the first quarter of 2017

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TSMC (2330-TW), the leading foundry company, held an earnings conference today (13th) to announce its first quarter financial report. Although revenue did not meet the lower target, gross profit margin and operating profit margin passed the lower-middle target, achieving previous estimates. Net profit after tax for the quarter was NT$87.63 billion, a decrease of 12.5% ​​from the previous quarter and an increase of 35% from the previous year. Net profit per share was NT$3.38.

TSMC's consolidated revenue in the first quarter was 233.91 billion yuan, a decrease of 10.8% from the previous quarter and an increase of 14.9% from the previous year. Affected by the excessive appreciation of the New Taiwan dollar, the revenue was lower than the lower end of the previously estimated range of 236 billion to 239 billion yuan; the gross profit margin reached 51.9%, reaching the estimated range of 51.5-53.5%, a decrease of 0.4 percentage points from the previous quarter and an increase of 7 percentage points from the previous year.

TSMC's first-quarter operating profit margin was 40.8%, which was in line with the previous forecast of 40.5-42.5%, a decrease of 1.1 percentage points from the previous quarter and an increase of 6.2 percentage points from the previous year.

TSMC's gross profit margin and operating profit margin in the first quarter were both affected by the excessive appreciation of the New Taiwan dollar, and only moved towards the middle and lower levels.

TSMC's non-operating performance was solid in the first quarter, with non-operating income of NT$2.47 billion and net profit attributable to the parent company after tax of NT$87.63 billion, a quarterly decrease of 12.5% ​​and an annual increase of 35%, the lowest point in the past three quarters, but still above the level of the second quarter of last year, with net profit per share of NT$3.38.

In US dollars, TSMC's revenue was US$7.51 billion, a 9% decrease from the previous quarter and a 22.2% increase from the previous year.

In the first quarter, TSMC's 16/20nm process shipments accounted for 31% of wafer sales, and 28nm process shipments accounted for 25% of the entire quarter's wafer sales. Overall advanced process (including 28nm and more advanced processes) revenue accounted for 56% of the entire quarter's wafer sales.

Wafer foundry outlook lowered, growth maintained at 5-10%

Liu Deyin, co-CEO of TSMC (2330-TW), the leading foundry company, said at an earnings conference today (13th) that due to the continuous inventory correction of IC design in the first half of the year, it is expected to return to normal by the end of the second quarter. Therefore, the global foundry industry growth rate this year has been lowered from the original estimated 7% to 5%. However, the overall semiconductor industry (excluding memory) is still expected to grow by 4%.

Regarding TSMC, Liu Deyin said that in terms of US dollars, this year's full-year revenue will still grow by 5-10% compared to last year, and its performance will still be better than the industry average. It is expected that TSMC's revenue in the first half of this year will grow by 12% compared to the same period last year in terms of US dollars, which is better than the original estimate of 10% growth.

Liu Deyin also believes that the semiconductor industry will continue to grow in the next few years, including the continued increase in the intrinsic value of semiconductors in smartphones. In addition, the concept of artificial intelligence will take shape, driving an increase in related demand such as high-speed computing.

Liu Deyin said that artificial intelligence will drive the growth of high-speed computing demand, including growth in shipments of data centers, servers, network communications and storage devices. Currently, TSMC has five 7-nanometer designs finalized (Tape Out), and its products will be used in high-speed computing products.

Liu Deyin estimates that after 2020, high-speed computing-related products will gradually become the main driving force of TSMC's revenue.

In addition, artificial intelligence will also make the size of the main chip in each smartphone larger, and TSMC's share of output value in smartphones is expected to continue to increase.

TSMC does not rule out building a factory in the United States

Regarding setting up a factory in the United States, Co-CEO Wei Zhejia said that TSMC is still evaluating the location of the 3nm factory and does not rule out the possibility of setting up a factory in the United States, but it is not the most ideal option.

TSMC CFO Li-Mei Ho said after the meeting that TSMC's new factory will still be mainly located in Taiwan, because TSMC's main production capacity is currently concentrated in Taiwan.

Where TSMC's 3nm factory will be located continues to be a hot topic in the industry. Recently, it was reported that TSMC considered the impact of factors such as insufficient water and electricity supply in Taiwan, so it gave up on setting up a new factory in Taiwan and decided to set up a factory in the United States for manufacturing.

On why he didn't bid for Toshiba

Regarding Toshiba's sale of its semiconductor business unit, Chief Financial Officer Ho Li-mei pointed out after the meeting that the company did evaluate it, but ultimately decided not to participate in the bid, mainly because the memory industry model is very different from TSMC's logic wafer foundry field. In addition, TSMC could not find any synergistic effect that could be generated by cooperating with Toshiba Semiconductor after participating in the bid.

Ho Li-mei said that TSMC did evaluate whether to bid for Toshiba's semiconductor business sale, as Chairman Morris Chang said. Before the bid deadline at the end of March, TSMC had decided not to participate in the bid.

He Limei emphasized that TSMC will not cooperate with other manufacturers to bid for Toshiba Semiconductor, nor will it participate in the second round of bidding.

TSMC Co-CEO Wei Zhejia said that TSMC's attitude towards the memory business is not to make standard products (Commodity) because the product and industry model are different from TSMC's wafer foundry field and are not TSMC's forte.

Compared to standard memory, Wei Zhejia said that TSMC makes a lot of embedded memory products (embedded Flash), but they are mainly produced in response to customer needs. After entering the advanced process (28 nanometers), more technical development is needed. TSMC has therefore invested and produced to meet customer needs.

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