TSMC Sees High Teens 2020 5G Phone Penetration, ‘Much Higher’ in 2021
Q3 revenue increased 16.9% in U.S. dollars sequentially from Q2 at Taiwan Semiconductor Manufacturing Co., “as we saw strong demand for advanced technologies and special technology solutions” in 5G smartphones, high-performance computing (HPC) and IoT applications, said Chief Financial Officer Wendell Huang on a Thursday investor call. Smartphone revenue increased 12% from Q2 and was 46% of third-quarter sales, he said. TSMC continues to expect “faster penetration” of 5G smartphones compared with 4G, he said. “For this year, we still forecast a high-teens penetration rate and next year even higher, much higher.”
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Though the pandemic continues to bring “some level” of negative impact to global economies, “we also observe that COVID-19 is accelerating digital transformation, while 5G and HPC-related applications continue to drive semiconductor content enrichment,” said CEO C.C. Wei. TSMC forecasts that semiconductor industry revenue, excluding memory, will rise by mid-single digits in 2020, he said. “Due to the robust demand from 5G smartphones and HPC applications,” TSMC reaffirms its 5-nanometer foundry ramp will contribute about 8% to its wafer revenue in 2020, “and we expect even higher percentages in 2021,” he said. He estimates the average 5G smartphone will have “about 30% to 40% more silicon content” than 4G handsets.
TSMC won’t comment on the “unfounded speculation” that it landed a Commerce Department license to ship to Huawei, said Wei. “We are complying fully with the regulations,” he said. The company also won’t comment “on our status right now” with Huawei, he said. TSMC is “still evaluating the impact to the semiconductor industry” from DOD’s export restrictions on Semiconductor Manufacturing International, China’s largest chipmaker (see 2009080057), said Wei. Its factory “capacity planning” is based on “the long-term demand profile” in 5G and HPC as a hedge against unexpected disruptions, he said.
Wei expects TSMC customers to maintain inventories well above their seasonal levels as a buffer against further COVID-19 supply-chain disruptions, he said. Due to the “uncertainties” of the supply chain amid the global pandemic, expect the high-level inventory trend to “continue for a longer period,” he said. TSMC won’t use any “short-term supply shortage” as an opportunity to raise “our wafer price,” he said. “We are selling our values, our service, to our customer.”
The company won’t comment on “specific customers” or products, said Wei when asked about speculation that Intel might outsource CPU production to TSMC amid industry processor shortages that are impeding laptop sales (see 2008280054). “But let me say” that Intel is “one of our important customers, and we continue to work with them,” he said: “Definitely today, there are some shortages, but we are doing our best to serve our customers.”
TSMC is “not ready to make any comment” about its migration to 2-nanometer production, said Wei when asked about reports it’s targeted to begin in 2024. “All we have disclosed about our 2-nanometer is the location” of the fab in Hsinchu, Taiwan, said Huang. “We have not commented on the technology specifications, the timing or anything beyond that.” TSMC is “engaging with more customers” on 3-nanometer compared with 5- and 7-nanometer “at the similar stage,” said Wei. “A lot of customers are working with us.” He expects the first 5G smartphones embedded with TSMC 3-nanometer components will reach the market by late 2022, he said.
Wei is seeing signs of a Q4 “recovery” in automotive, after the sector took a tremendous hit from COVID-19 in the first half of the year, he said. “In the longer term, the trend towards safer, greener and smarter vehicles will continue to drive silicon content increases as well as the demand for advanced and specialty technology,” he said. “I want to emphasize with our technology leadership, we are well-positioned to capture the opportunities.”