Unlike ASML's maintained weak guidance yesterday, TSMC raised its full-year guidance range. This again confirms that large AI exposure is the winning formula, with the same script as the Q1 earnings.
TSMC Q2 Earnings:
Revenue was $20.82B in USD terms, up 33% year over year and 10% sequentially. In NTD terms, revenue was NT$673.51B, up 40% year over year and 14% sequentially, the third consecutive quarter of year-over-year growth, all setting all-time highs.
Gross margin was 53.2%, down 0.9 percentage points year over year and up 0.1 percentage points sequentially.
Operating profit was $8.86B, up 35% year over year and 12% sequentially, with an operating margin of 42.5%.
Net income was $7.66B, up 29% year over year and 7% sequentially, marking the second consecutive quarter of year-over-year growth, with a net margin of 37%.
Equivalent 12-inch wafer shipments were 3,125K, up 7% year over year and 3% sequentially, ending six consecutive quarters of year-over-year declines; ASP was approximately $6,662, up 24% year over year, marking the 18th consecutive quarter of year-over-year growth and a new all-time high.
Capex was $6.36B, down 22% year over year; the 2024 capex guidance was raised from $28-32B to $30-32B.
Process and Platform Breakdown, Q2:
3nm accounted for 15%, 5nm for 35%, 7nm for 17%, 16nm for 9%, 28nm for 8%, 40/45nm for 5%, 65nm for 3%, 90nm for 1%, 0.11/0.13um for 2%, 0.15/0.18um for 4%, and 0.25um+ for 1%; advanced nodes (3nm/5nm/7nm) accounted for 67%, and 3nm/5nm combined accounted for 50%, once again confirming the divergence between TSMC's advanced-node revenue mix and ASML's EUV revenue mix noted yesterday.
3nm revenue grew 89% sequentially, setting a new all-time high; 5nm revenue grew 63% year over year, marking the fourth consecutive quarter of all-time highs.
HPC accounted for 52%, smartphones for 33%, IoT for 6%, and automotive for 5%; HPC has exceeded smartphones for seven consecutive quarters; HPC grew 28% sequentially, smartphones declined again sequentially, IoT grew 6% sequentially, and automotive grew 5% sequentially.
Outlook:
Q3 revenue is guided at $22.4-23.2B, up 30-34% year over year, expected to set another all-time high, driven by AI-related and high-end smartphone demand; N3 and N5 overall utilization is expected to improve further in the second half; full-year 2024 dollar revenue growth guidance was raised from 21-26% to 24-26%; Q3 gross margin is guided at 53.5-55.5%, operating margin at 42.5-44.5%.
TSMC noted that IDMs are increasingly entering the foundry space, blurring the boundaries, and therefore will include packaging, testing, mask-making, and other logic IC manufacturing-related areas in its Foundry 2.0 definition; under this new definition, the 2023 Foundry 2.0 market size was nearly $250B, with TSMC holding roughly 28% share, and the 2024 global Foundry 2.0 market is estimated to grow nearly 10%.
N2 is on track for volume production in 2025; the number of new N2 projects in its first two years is expected to exceed N3 and N5 at the same stage, with a ramp speed similar to N3, and revenue contribution and gross margin ramps faster than N3; N2P and A16 are planned for volume production in the second half of 2026, and virtually every AI chip company has expressed interest.
N3 demand is strong, and TSMC does not rule out converting more N5 capacity to N3; tool commonality between N5 and N3 exceeds 90%, and both nodes are in Tainan, making conversion very easy (this quarter's sequential N3 surge raises the question of whether N5/N4-to-N3 conversion is occurring).
CoWoS packaging capacity will double this year and more than double next year, easing supply tightness, with supply-demand balance expected in 2026; TSMC continues to collaborate with external OSATs; advanced packaging gross margin, once far below the corporate average, is now approaching it; TSMC emphasized it will focus only on the most advanced packaging technologies, primarily serving customers' leading-edge products.
Overall, TSMC remains steady: HPC continues to be strong, full-year guidance was modestly raised, once again proving that large AI exposure is the winning formula. Aside from robust AI demand and the memory cycle turnaround, the rest of the semiconductor end market has yet to recover.
Based on the upper end of full-year guidance, TSMC's full-year revenue of $87.3B and net income of $33.5B are well within reach, implying a 30x P/E at a trillion-dollar market cap.