TSMC still looks fab after Q2 update

Taiwanese chip manufacturer eyes production expansion in US, Japan to meet growing demand. Signals automotive chip shortages will ease.

Ken Wieland, contributing editor

July 15, 2021

3 Min Read
TSMC still looks fab after Q2 update

Taiwan Semiconductor Manufacturing Company (TSMC), the dominant maker of the world's most advanced chips, continues to ride high on the back of surging demand.

True, Q2 revenue in US dollars was slightly lower than the consensus of $13.31 billion (as reported by Seeking Alpha). But turnover at $13.29 billion still meant it was a record-breaking quarter and represented a vaulting 28% leap compared with Q2 2020 (2.9% increase on the previous quarter). TSMC is also guiding accelerated quarter-on-quarter top-line growth during Q3, at between $14.6 billion and $14.9 billion.

As reported by Reuters and the Financial Times (paywall applies), top brass at TSMC – speaking on the company's earnings conference call – said the company will expand production capacity in Nanjing, China. The focus here is on addressing what it called the "urgent need" of customers using older and more mature 28nm semiconductor manufacturing technology.

Expansion in US, Japan (but price points a problem)

With ongoing tension and uncertainty related to China's intentions toward the island nation state – China has never hidden its desire for "unification" – TSMC is understandably keen to spread its geopolitical bets.

TSMC chairman Mark Liu raised again the possibility of a "second phase" expansion at the company's $12 billion 5nm plant in Arizona – the setting up of the factory was done in the first place at the invitation of the US government, evidently concerned about TSMC's proximity to an increasingly aggressive-sounding China – while a plan is apparently under review about whether or not to establish a wafer fabrication plant in Japan.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

"We are expanding our global manufacturing footprint to sustain and enhance our competitive advantages, and to better serve our customers in the new geopolitical environment," explained Liu on the Q2 call with analysts. "While our overseas fabs are not initially able to match the costs of our manufacturing operations in Taiwan, we will work with governments to minimise the cost gap."

Liu further indicated that chip shortages will gradually ease for customers in the automotive industry, starting in the current quarter, but overall semiconductor capacity might still be an issue going into next year.

Thin wafers, fat margins

During Q2, TSMC shipments of 5nm accounted for 18% of total wafer revenue and 7nm made up 31%. 3nm is reportedly scheduled to enter trial production later this year.

"Our second quarter business was mainly driven by continued strength in HPC [high-performance computing] and automotive-related demand," said TSMC CTO Wendell Huang in prepared remarks.

"Moving into third quarter 2021, we expect our business to be supported by strong demand for our industry-leading 5nm and 7nm technologies, driven by all four growth platforms, which are smartphone, HPC, IoT and automotive-related applications."

Q2 gross margin was 50%; operating margin 39.1%; and net profit margin 36.1%. Diluted earnings per share stood at NT$5.18 compared with NT$4.66 during Q2 2020.

— Ken Wieland, contributing editor, special to Light Reading

Read more about:


About the Author(s)

Ken Wieland

contributing editor

Ken Wieland has been a telecoms journalist and editor for more than 15 years. That includes an eight-year stint as editor of Telecommunications magazine (international edition), three years as editor of Asian Communications, and nearly two years at Informa Telecoms & Media, specialising in mobile broadband. As a freelance telecoms writer Ken has written various industry reports for The Economist Group.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like