TSMC's IP supply chain will benefit from China's de-Americanization trend

The revenues of TSMC's IP supply chain, including Creative, PowerMedia, and M31, varied in August, but looking ahead, they are pleased to see that mainland China's wafer foundries and IC design houses are expanding their use of their companies' IPs and contributing to their revenues amid the de-beautification trend.

TSMC's subsidiary Creative's monthly revenue was NT$854 million, up 4.82% from the previous month and down 30.03% from the previous year. Affected by the shutdown of virtual currency business and weak demand for consumer terminals, the cumulative revenue for the first eight months was NT$6.656 billion, down 20.02% from the previous year, the lowest in the past three years.

General Manager Chen Chaogan recently admitted that the trade war will have an impact on the company in the short term, but he is optimistic about the long-term trend of China accelerating its chip independence. Currently, he sees strong demand in artificial intelligence (AI), 5G, and high-performance computing (HPC) in the mainland, and 5G-related products have also been shipped to a major mainland network communication equipment manufacturer.

Liwang's revenue in August was 82.18 million yuan, a monthly decrease of 63.63%, but an increase of 9.6% compared with the same period last year. The cumulative revenue in the first eight months of this year was 1.019 billion yuan, a year-on-year decrease of 1.76%. Among them, the cumulative royalty income in July and August was 233 million yuan, a 10% increase over the same period last quarter, which was in line with the company's expectations.

General Manager Shen Shijie said in the financial report meeting last month that the business in mainland China has indeed made great progress recently, especially as Power Media IP is not affected by trade sanctions. He is optimistic that the largest mainland IC design customer will put 14nm products into production in the fourth quarter, and 7nm FPGA customers and major US PMIC customers will also start mass production, which will steadily help the revenue in the second half of the year.

In addition, Shen Shijie emphasized that the company has recently completed the design of 5-nanometer products in cooperation with TSMC and other wafer foundries, and is currently the only company in the world that provides 5-nanometer related IP.

M31 Yuanxing's monthly revenue was 92.336 million yuan, a monthly decrease of 3.45% and an annual increase of 14.93%, the second highest this year; the cumulative revenue from January to August this year was 539 million yuan, a year-on-year increase of 22.91%, setting a new historical record.

M31 has recently obtained a number of new authorization cases from Huawei HiSilicon and SMIC. In the first half of last year, the revenue share of mainland customers was about 37%, lower than the 43% of American customers. In the first half of this year, the share of mainland performance has reached 62%. Industry insiders are optimistic that M31's IP will enter major manufacturers such as TSMC, Samsung, and Qualcomm, and expand cooperation with European first-tier car manufacturers and the largest automotive chip manufacturer in the United States. The operation is expected to grow significantly in the second half of the year.