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The Taiwan Semiconductor Manufacturing Company (TSMC) released its results for the second quarter of 2022 earlier today in Taiwan. The results were followed by a customary management conference where executives from the world’s largest contract chipmaker shared details on the company’s latest technologies, the state of the semiconductor industry -drivers and capital spending plans at a time when the chip sector is in the midst of a cyclical downturn. TSMC’s revenue and net profit grew double digits annually in the second quarter, and the company expects exchange rate fluctuations to help it further down the road, but has put warns against the rise in electricity and raw material costs which would have an impact on its margins.
TSMC Chief States Chip Correction will last through 2022 and end in 2023
TSMC’s earnings release came at a time when the company’s main rival in contract chipmaking, Samsung, rushed to announce it would take the lead in mass chip production. on the 3 nanometer (nm) process node. However, Samsung’s announcement did not indicate whether the factory had won any major orders for its process technology, which is crucial for any new technology as it enters production.
During its earnings call earlier today, TSMC shared that its plans for the same manufacturing process and its successor are on track. The company’s management pointed out that 3nm will go into mass production in the second half of this year, and at the same time, the executives also shared details about TSMC’s 2nm node.
The 2nm process is 10% to 15% faster than the 3nm node at the same power consumption levels and 25% to 30% more efficient at the same frequencies. However, reports have also indicated that in terms of density, the new process makes an unimpressive 10% increase over its predecessor, with TSMC yet to provide details on this.
As for production, TSMC management pointed out that 2nm will enter trial production in 2024 and mass production in 2025, repeating their previous timelines.
TSMC Managing Director Dr. CC Wei also shared his thoughts on the ongoing inventory correction in the semiconductor industry. Dr Wei stressed that he thinks it will take several quarters for inventory levels to stabilize and correct, the earliest being 2023. However, he remains optimistic about his company’s ability to maintain levels of growth during this period and to experience a compound annual growth rate (CAGR) of between 10% and 15%.
The fab’s chief financial officer, Mr. Wendell Huang, said his company expects the number of days in process inventory (DOI) in the industry to decrease in the second half of this year. He also shared that while it is too early to assess the impact that 3nm production will have on TSMC’s expenses, it is estimated that the impact should be around 2%.
Speaking of costs, Dr Wei said he expects positive fluctuations in exchange rates to improve his company’s earnings, but warned that higher energy and raw material costs would offset benefits. However, he also believes that TSMC can maintain a 54% gross margin over the long term.
Finally, the executives also shed light on TSMC’s plans in the United States. The company is building its largest facility in the country, which is expected to become operational by 2024, and its executives have denied they are pursuing a joint venture in America. Additionally, they also pointed out that TSMC continues to seek government grants, in response to a question about a bill stalled in the US Congress that is currently awaiting bipartisan support.