Following the magnitude 7.2 earthquake in Taiwan on April 3rd, all of TSMC’s fabs resumed normal operations within three days. According to a report from Commercial Times, TSMC expects to recognize earthquake-related losses of approximately NTD 3 billion (roughly USD 92.1 million) in the second quarter after deducting insurance claims.

During its earnings call on April 18th, TSMC President C.C. Wei expressed gratitude for the dedication and hard work of all employees and supplier partners. He also thanked customers for their understanding and support, stating that TSMC would compensate for production losses in the second quarter.

C.C. Wei stated that during this earthquake, the maximum intensity experienced at TSMC’s fabs was level 5. Immediately following the earthquake, TSMC activated safety measures and occupational health systems at the fabs. All personnel were safe, and through everyone’s tireless efforts, plant operations were swiftly restored.

Due to TSMC’s extensive experience and capabilities in earthquake response and disaster prevention, coupled with regular safety drills, the overall equipment recovery rate of TSMC’s fabs exceeded 70% within 10 hours of the earthquake and was fully restored before the end of the third day following the earthquake. There were no power outages or structural damages at TSMC’s fabs, including critical equipment such as extreme ultraviolet (EUV) exposure machines, all of which remained undamaged.

During this earthquake, although TSMC experienced a certain quantity of wafers in production that were affected and had to be scrapped, it is anticipated that most of the production losses will be recovered in the second quarter, resulting in minimal impact on second-quarter revenues.

TSMC expects the overall impact of the earthquake to decrease its second-quarter gross margin by approximately 50 basis points, primarily due to losses related to wafer scrap and material consumption.

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(Photo credit: TSMC)

TSMC held an earnings call on April 18, where it highlighted two significant revisions. The company revised down its annual growth expectations for the global foundry industry and shifted its outlook on automotive growth from positive to declining.

When asked about the outlook for end applications and the differences from three months ago, C.C. Wei stated that the differences appear minimal. However, while the previous forecast anticipated growth in automotive for the full year, it is now expected to decline.

In the previous earnings call in January, C.C. Wei mentioned that TSMC was expected to achieve healthy growth in 2024, with revenue growth surpassing the global foundry industry’s average of 20%, projected to range from approximately 21% to 26%.

In the latest earnings call, TSMC adjusted the forecast for the 2024 semiconductor market (excluding memory) to increase by about 10% year-over-year, with the foundry industry growth expected to be in the mid-to-high teens percent range. These adjustments follow a steep inventory correction and low base in 2023. Despite this, TSMC believes that 2024 is still anticipated to be a strong growth year for them.

Industry sources cited by Economic Daily News believe that the main reasons for these forecasts are the slower recovery of mature process applications and automotive demand.

Regarding the challenges faced by mature processes in competition, C.C. Wei mentioned that collaboration with customers on mature processes focuses on developing special processes. He expressed confidence that such collaboration can continue to thrive even in the face of industry oversupply.

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(Photo credit: TSMC)

Micron, the largest memory manufacturer in the United States, is expected to receive over USD 6 billion in funding from the Department of Commerce to assist with the costs of local factory projects, as part of efforts to bring semiconductor production back to U.S. soil.

According to a report from Bloomberg, sources revealed that the funding has not been finalized yet and could be announced as soon as next week. It is still unclear whether Micron plans to seek further loans through the “Chip Act” in addition to direct funding.

Micron Technology, the U.S. Department of Commerce, and representatives from the White House all declined to comment on the reported funding.

The U.S. “Chip Act” provides semiconductor companies with USD 39 billion in direct funding and USD 75 billion in loans and loan guarantees to revitalize the U.S. semiconductor manufacturing industry, which has shifted production to Asia over the past few decades. U.S. Commerce Secretary Gina Raimondo stated that approximately USD 28 billion of this funding will be allocated towards advanced manufacturing processes.

So far, the Department of Commerce has announced six grants, with three provided to established semiconductor companies. Specifically, TSMC received USD 6.6 billion USD, Samsung received USD 6.4 billion, and Intel received USD 8.5 billion.

As per the same report from Bloomberg, Micron has committed to building up to four factories in New York and one in Idaho. However, Micron CEO Sanjay Mehrotra emphasized in March that these plans require Micron to obtain sufficient chip subsidies, investment tax credits, and incentives to address the cost differentials compared to expanding overseas.

Raimondo previously stated that the Department of Commerce will prioritize funding projects that commence before 2030. Per to previous documents from Micron cited by Bloomberg, among the four planned factories in New York, only two new factories may meet this requirement, with the other two not expected to start operations until 2041. Insiders suggest that this could mean that Micron’s subsidies may only support the first two factories in New York.

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TSMC today announced consolidated revenue of NTD 592.64 billion, net income of NTD 225.49 billion, and diluted earnings per share of NT$8.70 (USD 1.38 per ADR unit) for the first quarter ended March 31, 2024. Year-over-year, first quarter revenue increased 16.5% while net income and diluted EPS both increased 8.9%.

Compared to fourth quarter 2023, first quarter results represented a 5.3% decrease in revenue and a 5.5% decrease in net income. All figures were prepared in accordance with TIFRS on a consolidated basis.

In US dollars, first quarter revenue was $18.87 billion, which increased 12.9% year-over-year but decreased 3.8% from the previous quarter. Gross margin for the quarter was 53.1%, operating margin was 42.0%, and net profit margin was 38.0%.

In the first quarter, shipments of 3-nanometer accounted for 9% of total wafer revenue; 5- nanometer accounted for 37%; 7-nanometer accounted for 19%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 65% of total wafer revenue.

“Our business in the first quarter was impacted by smartphone seasonality, partially offset by continued HPC-related demand,” said Wendell Huang, Senior VP and Chief Financial Officer of TSMC.

“Moving into second quarter 2024, we expect our business to be supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality.”

Based on the Company’s current business outlook, management expects the overall performance for second quarter 2024 to be as follows:

• Revenue is expected to be between US$19.6 billion and US$20.4 billion; And, based on the exchange rate assumption of 1 US dollar to 32.3 NT dollars
• Gross profit margin is expected to be between 51% and 53%
• Operating profit margin is expected to be between 40% and 42%

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(Photo credit: TSMC)

Following the announcements of AI PC processor chips by NVIDIA and Intel, AMD has also entered the fray by unveiling the Ryzen Pro 8040 and Ryzen Pro 8000 series chips. According to a report from Commercial Times, they will be manufactured by TSMC and are expected to be released in the second half of the year.

On April 16th, AMD announced that the Ryzen Pro 8040 series chip, designed for laptops, and the Ryzen Pro 8000 series chip, designed for desktops, are the most advanced commercial PC chips ever created. These chips will be manufactured using 4-nanometer technology. It is expected that new AI PCs from HP and Lenovo, starting in the second half of this year, will incorporate these two major chip series.

“AI PC” are laptops and desktops capable of directly running real-time language translation and other AI applications locally, as opposed to most PC devices on the market that rely on cloud platforms for AI computations.

Intel previously announced the Core Ultra series chips designed specifically for AI PCs last year and claimed that the first batch of over 230 AI PCs globally will feature this series of chips. Collaborating partners include major PC manufacturers such as Acer, ASUS, Dell, HP, and Lenovo. Gelsinger once expressed at a New York launch event in 2023 that they anticipate the AI PC to be the standout performer in the coming year.

NVIDIA also unveiled a new generation of AI chips in January of this year, claiming they can execute AI applications directly on PC. Collaborating partners include Acer, Dell, and Lenovo.

Similarly targeting the AI PC market, AMD previously announced the Ryzen 8000G series chips designed specifically for desktops in January. Previously, during an interview with Chinese media Sina, Lisa Su, CEO of AMD, indicated that AI-powered PCs will play a crucial role in driving the growth of the PC market this year.

As NVIDIA, Intel, and AMD vie for opportunities in the AI market, TSMC, which possesses the world’s most advanced chip manufacturing technology, emerges as the primary beneficiary. TSMC currently manufactures AI chips for NVIDIA using a 3-nanometer process and is expected to begin mass production of the next-generation 2-nanometer process starting from next year.

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(Photo credit: AMD)