Semiconductor giant TSMC raises 2020 capex to $17 bil. on strong 5G, high-performance computing demand

16, Jul. 2020

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TAIPEI, NNA - Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, has decided to raise its full-year capital expenditure to between $16 and $17 billion on growing demand for 5G and high-performance computing (HPC) applications.

Despite COVID-19 casting shadows over the global economy, the contractor better known as TSMC has seen its business holding up well so far, bolstered by its leading 5- and 7-nanometer technologies, which prompted it to increase its capex from the initial $15 billion to $16 billion.

“(The move is to) meet the demand and support our customers’ capacity needs,” Vice President and CFO Wendell Huang said at an online investors’ conference on Thursday.

The semiconductor giant expects the July-September quarter revenue to be between $11.2 billion and $11.5 billion, with a gross margin between 50 and 52 percent, supported by a boost in output of 5G smartphones and demand for HPC-related products. The company expects an operating profit margin of 39 to 41 percent, a bit lower than the 42.2 percent of the previous quarter.

“We expect our business to be supported by strong demand in our industry-leading 5-nm and 7-nm technologies, driven by 5G smartphones, HPC and IoT-related applications,” CEO C. C. Wei told investors.

TSMC reported an 81 percent jump in net profit to NT$120.8 billion ($4.1 billion) in the April-June quarter thanks to robust orders for advanced chips. It logged $10.38 billion in revenue, a 34.1 percent increase on year and 0.8 percent growth on quarter. Net profit margin was 38.9 percent, up 1.2 percentage point from the previous quarter, in line with the company's forecast.

Amid disruptions to global economies due to the pandemic, TSMC has observed weak consumer demand in the first half of this year, and foresees the global smartphone sector declining to a “low-teen percent” on year in 2020.

Smartphone chips contributed 47 percent of the second-quarter revenue, down 4 percentage points on quarter, while HPC chips soared 12 percentage points to 33 percent of the earnings.

Wei said TSMC expects the overall semiconductor market, excluding memory chips, in 2020 to remain flat or slightly grow, while the foundry sector would grow by a “mid-to-high teen” percent. The contractor itself, however, will rely on its technology leadership, anticipating to grow above 20 percent in 2020 in dollar terms.

In light of advanced process progress, TSMC is expecting a strong ramp up of 5-nm in the second half of this year, and will contribute about 8 percent of its wafer revenue in 2020.

Wei said its new $12 billion plant in Arizona will start off with its 5-nm process and turn out 20,000 wafers each month when ready in 2024.

The wafer-producing facility “enables TSMC to expand its ecosystem and better service our customers and partners, and as TSMC’s global presence increases, it will allow us to better reach global talent to sustain our technology leadership,” Wei said.