TSMC becomes the winner of core shortage, 3nm process enters risky mass production this year

The global core shortage has once again lifted the market value of TSMC (TSM.US) to a high level. In the US stock trading on January 3, TSMC rose 7.06% that day to $128.80, and its market value reached a one-year high. Goldman Sachs pointed out in a report that due to rising chip prices, high-performance computers (HPC)/5G in the industry upgrade cycle, and other favorable factors, TSMC’s growth rate in 2022 will be higher than in 2021. TSMC’s revenue this year is expected to increase year on year. 26.1%, the target price is raised from 1028 Taiwan dollars to 1035 Taiwan dollars. The new target price means that the stock has a 68% potential upside compared to the closing price on December 30.

The news that TSMC plans to start production of 3nm process chips in the fourth quarter of this year also indirectly stimulates its stock price. In a previous meeting, TSMC President Wei Zhejia stated that the risky mass production of the 3-nanometer process is planned to start mass production in the second half of 2022. At present, 5nm is an important source of revenue for TSMC.

According to TSMC’s third-quarter performance, shipments of the 5-nanometer process accounted for 18% of the company’s wafer sales in the third quarter of 2021, and shipments of the 7-nanometer process accounted for 34% of the company’s wafer sales for the whole quarter.TrendForce, a research organization, pointed out that TSMC is in Apple iPhone Driven by the new machine, revenue in the third quarter reached US$14.88 billion, an increase of 11.9% quarter-on-quarter, ranking first in the world. Among them, 7nm and 5nm were affected by intelligent mobile phones Driven by the demand for high-performance computing and high-performance computing, the combined revenue of the two has surpassed TSMC’s overall share of more than half, and is continuing to grow.

From the perspective of the global wafer foundry layout, the only ones that can compete for advanced wafer manufacturing processes are now TSMC, Samsung, and Intel. In November last year, Samsung Electronics announced that it would start mass production of 2nm chips from 2025. Intel also announced plans to strengthen its foundry and hopes to catch up with competitors such as TSMC and Samsung by 2025. In the face of strong opponents, TSMC used actions to make a “retaliation.” On December 28 last year, the news that TSMC was going to build a 2nm factory in Taiwan, China, spread in the supply chain. The investment in the factory is expected to be as high as NT$800 billion. Wei Zhejia has previously revealed that TSMC’s 2nm process technology will be mass-produced in 2025.

In addition to the 2nm investment plan, TSMC also spent US$12 billion to build a 5-nanometer chip factory in Arizona, USA. At the second-quarter performance meeting of 2021, TSMC Chairman Liu Deyin said that the construction of the US factory has already started, and the equipment is expected to enter the factory in the second half of 2022. However, the expansion of the advanced production capacity of the fab cannot meet the needs of current customers.

In an Apple chip roadmap released by The Information, Apple expects to release 3nm-based third-generation M-series chips in 2023, which are codenamed “Ibiza”, “Lobos” and “Palma”. At the same time, in the third-generation M series chips, the high-end version plans to have up to 40 processor cores and will use multi-chip packaging technology, and 40 processor cores will be distributed on four chips. In the second generation of M series chips, Apple will also plan to use TSMC’s enhanced version of 5nm process manufacturing. So far, Apple’s new products have almost locked the production capacity of all TSMC’s advanced manufacturing processes.

According to TrendForce’s consulting data, with the gradual increase in a new capacity of foundries and the continuous increase in average selling prices, the output value of foundries in the third quarter reached US$27.28 billion, an increase of 11.8% quarter-on-quarter, which has been nine consecutive years. Set a record high in this quarter. “Despite the announcements of various foundries for capacity expansion and plans to build new factories, most of the new capacity has been booked as soon as they are opened, and new factories still need time to brew.” TrendForce Consulting analysts said. But looking at the long-term chip competition, it is not just a competition for the technology itself, but competition for comprehensive resources and capabilities.

The research report of IC Insights, a research organization, pointed out that in the next few years, the advanced process market will set off fierce competition, and the foundry market will face pricing pressure. Therefore, in the case of high-cost investment and the construction of fabs in various places, whether TSMC can maintain a high gross profit margin may become a new issue.

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