On July 18th, TSMC announced its Q2 2024 financial report, with core financial indicators showing a double increase compared to the previous quarter.
In the second quarter, TSMC achieved a revenue of NT $673.51 billion, a year-on-year increase of 40.1% and a month on month increase of 13.6%, with a market estimate of NT $658.14 billion;
Net profit of NT $247.8 billion, a year-on-year increase of 36.3% and a month on month increase of 9.9%, with a market estimate of NT $235 billion;
Operating profit was NT $286.56 billion, a year-on-year increase of 41.9% and a month on month increase of 15.1%, with a market estimate of NT $274 billion.
In addition, the gross profit margin for the second quarter was 53.2%, with a market estimate of 52.6%; The operating profit margin is 42.5% and the net profit margin is 36.8%.
Source: TSMC Financial Report
Both the actual revenue, gross profit margin, and operating profit margin have exceeded the upper limit of TSMC's previous forecast range.
At the April press conference, TSMC predicted its second quarter US dollar revenue to be between 19.6 billion and 20.4 billion US dollars. If calculated at a 1:32.3 exchange rate between the New Taiwan Dollar and the US Dollar, the converted revenue would be approximately 633 billion to 658.92 billion New Taiwan Dollars; The estimated gross profit margin for the second quarter is 51% -53%, and the operating profit margin for the second quarter is 40% -42%.
TSMC's US stock market maker rose in the short term during night trading, and as of press time, the pre-market increase has expanded to 3.86%.
3nm process exhibits high growth potential
Advanced process products remain the revenue pillar. In the second quarter, TSMC's advanced processes (7nm and below) accounted for 67% of the total wafer revenue, an increase of 2 percentage points compared to the previous quarter (65%). TSMC stated that 3nm process products contributed to its performance, accounting for 15% of the total wafer revenue for this quarter; 5nm and 7nm account for 35% and 17% respectively.
Thanks to the introduction of 3nm technology into Apple phones, TSMC's business in this area officially started in the third quarter of last year.
Source: TSMC Financial Report
As can be seen, in the second quarter of this year, the revenue growth of 3nm process was the largest among all product lines, achieving a month on month doubling growth.
At present, the application scenarios of 3nm technology are mainly high-end mobile phones. With more high-performance computing (HPC) customers such as Qualcomm and MediaTek adopting 3nm technology in 2024, its growth is expected to continue.
Mobile phones and AI related products are expected to continue driving the demand for advanced processes
At present, HPC (high-performance computing) has steadily replaced the mobile phone business and become the core of TSMC's performance support. In the second quarter, the revenue of this business increased significantly by 28% compared to the previous quarter, followed closely by DCE business, namely Digital Consumer Electronics, which includes T-Con, PMIC, WiFi chips, etc., targeting application scenarios such as set-top boxes and smart TVs. The revenue of this business increased by 20% compared to the previous quarter.
Source: TSMC Financial Report
Source: TSMC Financial Report
The above figure clearly shows the growth of TSMC's various businesses.
It is worth noting that the market generally believes that TSMC's AI business is included in these two businesses (HPC and DCE).
Research firm Qunzhi Consulting previously estimated that in 2023, TSMC's AI chip revenue accounted for about 13% of its HPC revenue, and it is expected to reach about 15.4% by 2024. "It is expected that HPC will bring the main growth momentum to TSMC's performance in 2024," Counterpoint has stated that the mention of AI enabled smart devices in DCE may be related to AI business.
In addition, in the second quarter, the mobile phone market, which accounted for 33% of the performance, still did not show a significant recovery, with a 1% decrease in revenue compared to the previous quarter, which was the only part of the business that declined and became a significant drag on performance.
TSMC Senior Vice President and Chief Financial Officer Huang Wende said, "In the second quarter, the strong growth of our business was due to the strong demand for 3nm and 5nm technologies in the market, but this growth was partially offset by the continued seasonal factors of mobile phones. As we enter the third quarter of 2024, it is expected that the strong demand for advanced process products in mobile phones and AI related products will support our performance
Further increase in capital expenditure to expand production focus on 3nm/2nm processes and COWOS packaging
TSMC has provided a positive performance outlook and a capital expenditure plan that exceeds market expectations——
TSMC Chairman and President Wei Zhe jia stated that TSMC will raise its guidance for sales growth in 2024 in US dollars to the mid range above 20%; Expected third quarter sales of $22.4 billion to $23.2 billion; The gross profit margin ranges from 53.5% to 55.5%, with a market estimate of 52.5%; The operating profit margin ranges from 42.5% to 44.5%.
Capital expenditures for the full year of 2024 range from $30 billion to $32 billion. The previous capital expenditure guidance was between $28 billion and $32 billion, with a market estimate of $29.55 billion.
More resources will continue to be directed towards advanced process production capacity and AI products with strong demand.
TSMC stated that the demand for 3nm processes is very strong and does not rule out the possibility of converting more 5nm processes to 3nm. The construction of N2 factory (2nm process chip production line) is progressing smoothly, and the N2 process is planned to achieve mass production by 2025.
The COWOS packaging capacity will double in 2025 compared to 2024, and the COWOS packaging capacity will continue to be tight in 2025.
According to DIGITIMES, industry insiders have revealed that in the second half of this year, TSMC's monthly production of 3nm chips will increase from the current 100000 to 125000 to meet the needs of major customers such as Apple, Intel, Qualcomm, and MediaTek.
According to sources from semiconductor equipment companies, TSMC's production capacity for 5nm and 3nm processes is already at full capacity, especially with 3nm production capacity being in short supply. TSMC's current 5/3nm process capacity utilization rate has reached 100%, and it is expected that 2nm will be mass-produced as early as the fourth quarter of 2025, with a target monthly production capacity of 30000 pieces. With the expansion of the Kaohsiung plant in the future, it is expected that the combined monthly production capacity of Zhuke and Kaohsiung will reach 120000 to 130000 pieces.
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