TSMC's Legal Conference Highlights: 3nm to be mass-produced in the second half of the year

Today (13), TSMC held an online corporate briefing and released its fourth quarter financial report for fiscal year 2021 ending December 31.

The financial report shows that TSMC's consolidated revenue in the fourth quarter was 438.189 billion New Taiwan dollars (approximately US$15.846 billion), an increase of 21.2% from 361.533 billion yuan in the same period last year, setting a record for the sixth consecutive quarter; net profit was 166.232 billion yuan (approximately US$6.011 billion), an increase of 16.4% from 142.766 billion yuan in the same period last year.

In the financial report, TSMC also disclosed that their gross profit margin in the fourth quarter of last year was 52.7%, operating profit margin was 41.7%, and net profit margin was 37.9%, all lower than the same period last year, but slightly better than the previous quarter.

At the meeting, President Wei Zhejia said that the 3nm process is progressing as expected and will be put into mass production in the second half of this year. In addition, he also said that in order to meet the strong demand for special processes such as image sensors and non-volatile memory, TSMC will expand its 28nm process capacity in mainland China, Japan and Taiwan.

In addition, in response to relevant questions from Europe, Chairman Liu Deyin pointed out that setting up factories in Europe is still in the early stages and the primary consideration is still customer demand.

The following are the key points of the online Q&A organized by Jiwei.com:

1. The company's revenue growth in 2022 will be between 26% and 29%, but the growth of IC design is not that strong. Why can TSMC perform so well?

TSMC: Factors such as process, price increase, and capacity increase will have an impact on revenue. In 2022, it is expected that HPC and automotive electronics will grow higher than the company's average level, while revenue from IoT and smartphones will be similar to the company's average level.

2. It is estimated that the output value of semiconductors will reach 1 trillion by 2030. What will the output value of foundry be? Which parts will grow faster?

TSMC: The growth of foundry will definitely be higher than the overall semiconductor output value, because all chips require production capacity to supply. As the semiconductor output value increases, HPC, mobile phones, IoT, and automotive applications are all optimistic. HPC will be the strongest growth driver in the future and will contribute the most to revenue, with a long-term gross profit margin of more than 53%.

3. What is the current status of TSMC's mature process and the status of its competitors? Will there be an oversupply of production capacity in the future?

TSMC: In the past, the capacity utilization rate of mature processes was only 80%, but now the demand for CMOS and power is very strong. With strong demand growth, we don't need to worry too much about the company's competition. In the long run, the industry trend and the company's leading technology make us very confident in future growth.

4. Will the decline of stay-at-home economy and virtual currency have any impact on revenue?

TSMC: The supply chain will remain at a high level, but we do see that the demand from some end manufacturers is decreasing. However, even so, TSMC will not be affected too much due to its technological advantages. In addition, the financial forecast has already taken these negative factors into consideration.

5. Will capital expenditure peak in 2022? What about the next few years?

TSMC: Capital expenditure in 2021 is US$30 billion, and it is expected to be US$40-44 billion in 2022. 70-80% of the expenditure is spent on advanced processes, 10% on advanced packaging, and 10-20% on special processes.

If we see good growth prospects, we will increase capital expenditure and capital uncertainty will be high, but still at a normal level.

6. What is TSMC’s long-term gross profit margin target? What will be the process ratio this year?

TSMC: Gross profit margin will remain at 53% or above. N5 demand continues to be strong due to mobile phones and HPC; N4P has an 11% performance improvement and 22% power efficiency improvement over N5, and is expected to be mass-produced in 2022H2, which will support special HPC applications; N4X is also an enhanced version of 5nm and will be mass-produced in 2023H1. However, N5 will be a long-term process and will continue to dominate in the next few years. In addition, N3 will continue to use FinFET technology and start mass production in 2022H2