• TSMC joined other semiconductor companies in issuing cautious advice given the expected industry slowdown in the coming quarters. This includes the decline in the capacity utilization rate from the fourth quarter of 2022, investment reductions in 2022 and an order adjustment of 7/6 nm.
• TSMC’s 7/6nm contributed 26% of total revenue in Q3 2022. Based on our analysis, smartphones and HPC computing (PC and server processors, and GPUs) are the two largest segments of this technology node, accounting for 32% and 38%, respectively, of the total wafer shipment volume for 2022.
• TSMC blamed the 7/6nm softness on cyclical inventory adjustment and product delays from smartphone and PC customers. It looks like the inventory cycle will persist into 2023, primarily from APs/SoCs for consumer 5G smartphones.
• We agree with TSMC’s view on the positive drivers of migrating new products to the 7/6nm node, such as Wi-Fi, RF, and SSD controller ICs, post-cycle. inventory in 2023.
Although TSMC remains confident of business growth in 2023, the company admitted at its Q3 2022 investor conference that inventory headwinds will affect its near-term sales outlook with lower rates. of use in some geometric nodes. The 2022 capital spending revision from $40 billion to $36 billion echoed his conservative views on postponing new capacity construction amid the global semiconductor downturn, including the withdrawal of the new 7/6 nm line in Fab 22 due to uncertain market demand.
While TSMC expected strong demand for its current 5/4nm nodes with high utilization in Q4 2022 as well, it gave cautious guidance for 7/6nm on projections of a high utilization rate. declining usage over the next few quarters. TSMC attributed this to weakness in smartphones, as well as product delays in PC-related chipsets. The company expects the inventory adjustment cycle for all TSMC tech nodes and chip productions to likely persist until 2023.
TSMC’s 7/6nm node was its main revenue component before Q3 2022, contributing nearly 30% of its business in the first three quarters of 2022. TSMC owned a total of 145-150 KWPM (thousands of wafers per month) of installed capacity at 7/6nm in H1 2022 but will adjust the production plan for some equipment tools in H2 2022, partly taking into account deteriorating market demand for smartphones and PCs.
Breaking down TSMC’s wafer shipments for 7/6nm products, we found that HPC-related products (including PC and server CPUs, discrete GPUs, data center accelerator and ASIC /FPGA) accounted for 38% in 2022, followed by smartphone-related products (mainly on AP/SoC chipsets) at 32%. MediaTek, AMD and Qualcomm seemed to be the top three customers in this category.
Supply chain inventories will remain high at the end of 2022
Looking at the inventory level of smartphone APs/SoCs, which is the primary application for advanced foundry nodes (10nm and below), we believe that chipset vendor order corrections will come under greater pressure. from the second half of 2022 amid a weakening end market (sales) data point. Chip production lead time is as long as more than four months in advanced nodes, resulting in a lagged effect of wafer production cuts at the earliest from Q4 2022 in AP/SoC, CPU/GPU processors and AI for smartphones. As a result, the inventory cycle at the chipset level seems to have just started from the second half of 2022 and will continue until the end of the year or until the first half of 2023, as commented by TSMC during of the conference call with investors.
More of a cyclic adjustment issue in 7/6nm
While the global foundry industry’s utilization rate peaked in mid-2022, the decline will lead to lower business in all aspects over the coming quarters before signs of improvement appear. appear in inventory levels in the semi-supply chain. All of TSMC’s tech nodes will inevitably be impacted, especially 7/6nm with its highest concentration of smartphones and consumer PCs. Utilization here will drop to 80% to 90% over the next two to three quarters before demand picks up, driven by major 5G smartphone access points/SoCs and Intel ramps up its orders for Meteor Lake CPU tiles on TSMC. Furthermore, we agree with TSMC’s view on the positive drivers of migrating new products to the 7/6nm node, such as Wi-Fi, RF and SSD controller ICs, after the inventory cycle in 2023.
For more insights and analysis on the global foundry market, please refer to the infographic: Global Foundry Revenue Share | Q2 2022, which summarizes our quarterly views on technology and vendor shares.
Similar Items
#TSMCs #conservative #outlook #76nm #demand #reaffirms #weakness