In the Q2 earnings call today (July 18th), TSMC Chairman and CEO C.C. Wei introduced the concept of “Foundry 2.0,” redefining the foundry industry to further include sectors like packaging, testing, mask making, and others, the latest report by Technews noted.

C.C. Wei pointed out that under this new definition, TSMC’s foundry market share was 28% in 2023, and the foundry industry is expected to grow by 10% in 2024, while TSMC’s share will increase further. According to data from TrendForce, under the original definition of foundry, TSMC’s market share was 61.2%.

On the other hand, the semiconductor giant projects the entire semiconductor market, excluding memory, to grow by 10% in 2024.

TSMC’s CFO and spokesperson Wendell Huang explained that the reason for TSMC to propose “Foundry 2.0” is due to the involvement of IDM manufacturers in the foundry market, which has blurred the boundaries of the traditional foundry industry.

Moreover, C.C. Wei highlighted the strong demand for TSMC’s 3nm and 5nm processes. Thanks to the strong demand from AI and smartphones for advanced nodes, Wei believes that 2024 will be a strong year for TSMC. Meanwhile, the company also expects this year’s financial forecast and revenue to increase by 24-26% (mid-20%).

TSMC’s 3nm process accounted for 15% of wafer sales revenue in the second quarter of 2024, while 5nm and 7nm accounted for 35% and 17%, respectively. Overall, revenue from advanced processes (7nm and below) reached 67% of total wafer sales revenue for the quarter.

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(Photo credit: TSMC)

TSMC held its earnings call earlier today. Looking ahead to the third quarter, the company estimates that, based on an exchange rate of USD 1 to TWD 32.5, revenue will fall between USD 22.4 billion and USD 23.2 billion, representing at least a 7.5% increase quarter-over-quarter. Additionally, TSMC estimates that the gross margin for this quarter will be between 53.5% and 55.5%.

TSMC has announced consolidated revenue for the second quarter of TWD 673.51 billion, an increase of 13.6% quarter-over-quarter and 40.1% year-over-year. The accumulated consolidated revenue for the first half of the year is TWD 1.26 trillion, an increase of 27.9% year-over-year. The company’s profit for the second quarter was TWD 247.845 billion, a quarter-over-quarter increase of 9.9% and a year-over-year increase of 36.3%, with earnings per share of TWD 9.56.

TSMC Chairman and CEO C.C.Wei stated that TSMC continues to invest in advanced processes and support customer needs to ensure their success. He emphasized that TSMC’s success is tied to the success of its customers.

Wei further expressed satisfaction with the success of TSMC’s customers over the past few years, noting that leading-edge nodes continue to be produced in Taiwan. He also highlighted the close collaboration with customers and the sharing of value, expressing confidence that these strategies will enable TSMC to continue to grow healthily.

In order to support customer demand, TSMC has slightly narrowed its capital expenditure forecast range. The original range of USD 28-32 billion has been revised to an estimated range of USD 30-32 billion. This adjustment aligns roughly with market expectations; however, TSMC did not raise the upper limit but instead moved the lower limit upward.

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• [News] TSMC Reports Strong Q2 Financial Results, with 3nm Accounting for 15% of Shipments
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(Photo credit: TSMC)

Moments before TSMC’s earnings call, TSMC has released its financial results for the second quarter of 2024. Reportedly, TSMC announced consolidated revenue of NTD 673.51 billion, net income of NTD 247.85 billion, and diluted earnings per share of NTD 9.56 (USD 1.48 per ADR unit) for the quarter ended June 30, 2024.

(Photo credit: TSMC)

Compared to the same period last year, TSMC reported a 40.1% increase in second quarter revenue, with net income and diluted EPS also rising by 36.3%. Quarter-over-quarter comparisons with the first quarter of 2024 showed a 13.6% increase in revenue and a 9.9% increase in net income. All financial figures were prepared in accordance with TIFRS on a consolidated basis.

(Photo credit: TSMC)

In US dollars, TSMC’s second quarter revenue reached USD 20.82 billion, marking a 32.8% year-over-year increase and a 10.3% increase from the previous quarter. The quarter saw a gross margin of 53.2%, an operating margin of 42.5%, and a net profit margin of 36.8%.

During the second quarter, sales of 3-nanometer chips accounted for 15% (up from 9% of the first quarter) of total wafer revenue, while 5-nanometer chips accounted for 35%, and 7-nanometer chips accounted for 17%. Advanced technologies, including 7-nanometer and more advanced chips, constituted 67% of total wafer revenue.

(Photo credit: TSMC)

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(Photo credit: TSMC)

On July 17th, silicon wafer giant GlobalWafers announced that it is setting up a research and development center in Sherman, Texas, and constructing a 12-inch silicon wafer production line in St. Peters, Missouri. This move is expected to strengthen its US semiconductor supply chain. It is worth noting that the company has signed a preliminary memorandum of understanding with the US Department of Commerce and will receive a USD 400 million subsidy under the CHIPS Act.

US Secretary of Commerce Gina Raimondo noted that the US government is revitalizing the leadership position of the US semiconductor supply chain, encompassing materials, manufacturing, and R&D. GlobalWafers’ investment will enhance the US’s role in the semiconductor supply chain, provide locally sourced silicon wafers needed for advanced processes, and bolster the security of the supply chain.

GlobalWafers stated that its subsidiaries, GlobalWafers America (GWA) and MEMC, have signed a non-binding preliminary memorandum of understanding with the US Department of Commerce. Under the US CHIPS and Science Act, they will receive a USD 400 million subsidy, which is expected to be used for the construction costs of the Texas and St. Peters plants.

Upon completion, its production base in Sherman, Texas, will be the first advanced silicon wafer plant in the US with an integrated process in over 20 years.

At the Sherman, Texas production base, the initial phase of construction will create 1,200 jobs. Additionally, there will be 750 high-paying positions for production operators, technicians, and engineers in the future, with mass production expected to begin in 2026.

Once the St. Peters, Missouri plant is completed, it will be the only advanced 12-inch SOI  wafer production base in the US. It is expected to create 500 construction jobs and 130 high-paying positions.

Among the top 5 companies globally controlling over 80% of the 12-inch silicon wafer market, including GlobalWafers, 90% of these wafers are currently produced in East Asia. As per the plan, GlobalWafers’ plant in Sherman, Texas, will manufacture wafers for advanced, mature, and memory chips, while the St. Peters, Missouri plant will focus on wafers for defense and aerospace applications.

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(Photo credit: GlobalWafers)

Republican presidential candidate Donald Trump’s recent remarks on Taiwan “taking about 100% of our chip business” and thus should pay the U.S. for defense have raised concerns in the semiconductor industry. According to a report by Economic Daily, citing a Taiwanese scholar’s observation, as Trump’s odds of winning increase, related chip subsidies may face a higher chance of being adjusted.

In an interview with Bloomberg, Trump mentioned that Taiwan did take 100% of the country’s chip business, and thus should pay for defense, while the U.S. is “no different than an insurance company.”

Bilateral Trade Agreements, Such as US-Taiwan 21st Century Trade Initiative, May be Impacted

Regarding his comments, the report cited the observation by Liu Da-nian, Director of the Regional Development Study Center at the Chung-Hua Institution for Economic Research. The scholar noted that the notion that Taiwan is taking away American chip business is a preconceived misconception, as Taiwan’s chip manufacturing relies on its own R&D achievements, with little government subsidies. Instead of taking the development of Taiwanese industry into consideration, Trump only focused on the outcome, which is very unfair.

Liu said that since Trump opposes any bilateral trade agreements, if he is re-elected, the ongoing US-Taiwan 21st Century Trade Initiative negotiations could be affected, which covering topics including agriculture, labor and digital trade.

Liu analyzed that Trump, with his America-centric approach, would likely push for more of the supply chain to be based in the U.S. Additionally, he would tend to increase investment controls on China and impose heavier tariffs.

Furthermore, he stated that as Trump has threatened to impose a 10% tariff on all imports to the US if elected, Taiwan would not be exempt from this neither. He warned that such actions could disrupt global trade order, and the whole world be concerned about how to deal with Trump during his potential second term.

TSMC Unlikely to Suffer as the CHIPS Act Has Been Approved by Congress

It is also worth noting that in April, Taiwanese foundry giant TSMC is confirmed to receive a USD 6.6 billion subsidy from the U.S. government, under the framework of the CHIPS Act. The company plans to build its third fab in Arizona afterwards, with total investment rising to USD 65 billion.

Regarding the development afterwards, Liu stated that although Trump believes the US CHIPS Act is a misguided policy, the act was passed by the US Congress, making it difficult to overturn and it is already being implemented.

On July 17^th, GlobalWafers joins TSMC as the second Taiwanese semiconductor company to receive subsidies from the CHIPs Act. It is set to receive USD 400m in direct funding to support the opening of two new US-based manufacturing sites for semiconductor wafer production.

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• [News] US Reportedly Targeting China’s Mature Semiconductor Processes Next
• [News] TSMC Receives USD 6.6 Billion for Chipmaking from the US Government, Commits to Constructing Third Fab

(Photo credit: the White House)