Taiwan Semiconductor Manufacturing Co. expects the main driver of its growth in the next several years to be HPC, overtaking its current smartphone business...
Taiwan Semiconductor Manufacturing Co. (TSMC) expects the main driver of its growth in the next several years to be high-performance computing (HPC), overtaking its current smartphone business.
The world’s biggest chip foundry said its technology leadership during the third quarter this year helped it capture 5G and HPC orders that will increase company growth by about 30% in 2020, leading overall gains in the semiconductor industry.
The company made those predictions in spite of losing sales to China’s Huawei, which has been blacklisted by the US government in the tech war between the world’s two biggest economies. TSMC said its sales to Huawei, in 2020 its second-largest customer after Apple, will drop to zero in the fourth quarter this year in compliance with US regulations. The company has apparently had no trouble compensating for the loss of Huawei’s business, however; TSMC has had difficulty meeting customer demand as capacity utilization nears full loading.
“Definitely today there is some shortage, but we are doing our best to serve our customers,” TSMC CEO C.C. Wei said at an event last week in Taiwan to announce the company’s third-quarter results.
The company said the 5nm process that’s ramping up in competition with Samsung will account for about 8% of its 2020 revenue, rising to about 20% next year. In the 7nm node, TSMC has a market share of about 88%, according to Gokul Hariharan, an analyst with JPMorgan Chase.
The company is entering a healthy growth period, setting up for a multi-year tight capacity environment particularly at the leading-edge, according to Brett Simpson with Arete Research.
“Foundry fundamentals are booming, even without Huawei in the mix,” he said in a report provided to EE Times.
Some of the variables in the short term will include the possibility of increased outsourcing to TSMC from Intel and changes in US government policy on sales to Huawei, according to Simpson.
AMD’s shifting orders from GlobalFoundries to TSMC is leading HPC demand, which is also boosted by strong gaming, AI accelerator and PC peripheral orders, according to Credit Suisse analyst Randy Abrams. IoT has also rebounded on wearable and smart home strength, with only automotive customers lagging, he said.
TSMC expects its customers’ overall inventory to remain above their historical seasonal level throughout the rest of the year given a need to ensure supply chain security amid continuing uncertainties. That raises the risk of an inventory correction next year, according to Bernstein analyst Mark Li, who is a former TSMC engineer.
Capex Nudged Up
TSMC said it expects its 2020 capital expenditure to be about $17 billion, which is at the high end of an earlier company forecast in the range of $16 billion to $17 billion.
Capacity tightness prompted many to expect a capex increase, according to Bernstein’s Li. The $17 billion figure for this year probably is a “disappointment”, he said.
TSMC’s next half node jump, N4, is a migration from N5 with compatible design rules that provide further performance, power and density enhancement for 5nm products. The company said N4 risk production is targeted for the fourth quarter of 2021 with volume production scheduled in 2022.
“We expect our 5nm family to be a large and long-lasting node for TSMC,” CEO Wei said.
N3, the next full node after N5, will provide a 70% logic density gain, boosting performance up to 15% and cutting power by 30%. Risk production is scheduled for 2021 with volume production targeted in the second half of 2022, according to the company.
The big long-term question for TSMC is the extent to which Intel adopts foundries for its vast CPU lines, according to Arete Research.
A 100% shift during the next three to five years looks increasingly likely, but Arete doesn’t expect any announcements until after the US Congress decides on subsidies for US fab investment. There are early plans for Intel to build CPUs at TSMC based on N4 in 2022 as well as with Samsung, which could lead to a further boost TSMC’s N5 capacity plan and a significant uptick in TSMC’s long-term growth outlook, according to Arete’s Brett Simpson.