TSMC's 7nm production capacity has been snapped up

Although the Sino-US friction has not been completely resolved and the Japan-ROK dispute has brought new variables to the memory market, TSMC, the leading wafer foundry, has just finalized good news with its customers for orders in the second half of the year, including the start of Apple's A13 application processor production, AMD's expansion of orders for Zen 2 architecture processors and Navi graphics chips, and Huawei HiSilicon's advanced process production volume in the third quarter hit a new record high. TSMC's 7nm production capacity in the second half of the year is fully loaded, and 16/12nm production capacity is also in short supply.

The Sino-US trade friction suppressed the terminal demand in the first half of the year, and the semiconductor production chain entered the inventory adjustment. The utilization rate of TSMC's advanced process capacity was sluggish. Although the exchange rate of the New Taiwan dollar against the US dollar depreciated after May, the consolidated revenue in the first half of the year still fell by 4.5% year-on-year to 459.703 billion yuan. The market originally expected that TSMC might not have a strong peak season in the second half of the year, but equipment manufacturers revealed that TSMC had finalized orders for the second half of the year with all customers from mid-June to early July. The most surprising thing for the market was that the orders for advanced processes were strong, and the 7-nanometer capacity in the second half of the year was almost sold out.

TSMC's largest customer, Apple, is expected to complete the final version of the A13 application processor for the new iPhone and enter mass production in the near future. The A13 processor uses TSMC's customized 7nm process. Although the market is conservative about Apple's new iPhone sales this year, Apple's A13 processor production volume is about the same as last year's A12 processor. Supply chain industry insiders pointed out that Apple's new orders will start to increase in August and will be fully mass-produced in September. It will become TSMC's largest 7nm customer in the second half of the year and firmly sit on the throne of TSMC's largest customer.

Although Huawei HiSilicon has been included in the U.S. Department of Commerce's list of prohibited export entities, the ban has not yet been officially lifted. However, Huawei HiSilicon's investment in TSMC's 16/12nm and 7nm advanced processes has continued to increase, setting a new record in the third quarter. It did not reduce its investment in the third quarter as rumored. Not only has it remained TSMC's second largest customer, its revenue share has gradually narrowed the gap with Apple.

Industry insiders revealed that Huawei HiSilicon's 7nm smartphone wafer production in the third quarter decreased by nearly 20% compared with the previous quarter, but the new generation Kirin processors that support extreme ultraviolet (EUV) 7+ nanometers increased sharply. In addition, Huawei HiSilicon's 7nm wafer production related to 5G base station equipment increased significantly, and 5G baseband wafer production increased significantly. Overall, Huawei HiSilicon is still continuing to pursue orders for TSMC's 7nm and other advanced process wafers in the second half of the year.

AMD will start shipping 7nm processors and graphics chips in the second half of the year, and will naturally become a major 7nm customer of TSMC, and the customer with the fastest growth in TSMC's revenue. AMD's Zen 2 architecture Ryzen desktop processors and RDNA architecture Navi graphics chips, which have been mass-produced and launched, are all mass-produced using TSMC's 7nm process, code-named Rome, and the EPYC 2 server processors that also use the Zen 2 architecture will be mass-produced using 7nm in the third quarter. In addition, AMD will also launch 7nm notebook Ryzen Mobile and commercial Ryzen Pro processors in the second half of the year, and its wafer investment in TSMC is expected to increase until the end of the year.