Yesterday ASML held firm, maintaining its 2023 full-year revenue growth target of 25%, becoming one of the few giants still growing in the semiconductor super-downcycle. Yet TSMC, which previously guided for full-year growth, failed to defend that target today.
TSMC Q1 Earnings:
Revenue in USD $16.72B, down 5% year over year, down 16% sequentially; in NTD NT$508.63B, up 4% year over year, down 19% sequentially; year-over-year growth rate lowest since early 2019.
Gross margin 56.3%, up 0.7 percentage points year over year, down 5.9 percentage points sequentially.
Operating income in USD $7.6B, down 5% year over year, down 27% sequentially; operating margin 45%.
Net income in USD $6.8B, down 6% year over year, down 26% sequentially; net margin 41%.
Wafer shipments 3,227K, down 15% year over year, down 13% sequentially; ASP ~$5,181, up 11% year over year, the 13th consecutive quarter of year-over-year growth.
Free cash flow in USD $2.7B, down 31% year over year, down 43% sequentially.
Capex in USD $9.94B, up 6% year over year; full-year capex guidance maintained at $32-36B.
By Process and Platform, Q1:
5nm 31%, 7nm 20%, 16nm 13%, 20nm 1%, 28nm 12%, 40/45nm 7%, 65nm 6%, 90nm 2%, 0.11/0.13um 2%, 0.15/0.18um 5%, 0.25um+ 1%; advanced nodes (5nm/7nm) 51%.
HPC 44%, Smartphone 34%, IoT 9%, Automotive 7%; HPC share exceeded smartphone for the second consecutive quarter. Automotive was the only segment to grow sequentially; smartphone down 27% sequentially, HPC down 14% sequentially.
Notably, mainland China revenue share hit 15% this quarter, a high since 2020, driven by strong mature-node demand; TSMC also noted robust demand at its Nanjing 28nm fab.
This was consistent with Lam Research's earnings call that morning. Lam said that although the global semiconductor equipment market was falling sharply to $7.0B-$7.5B that year, demand in mainland China was growing, particularly for mature-node logic and memory. ASML had made the same point in its earnings report the previous day.
Outlook:
Q2 revenue guidance $15.2-16.0B, down 12%-16% year over year; gross margin 52%-54%; operating margin 39.5%-41.5%.
Q2 utilization at the trough; company results at the bottom. Expects semiconductor industry to gradually recover in H2 2023, with H2 business stronger than H1. Guides full-year revenue down low- to mid-single digits, lowering the prior full-year outlook.
PC and smartphone markets remain weak; auto demand stable but may decline in H2.
Ex-memory, 2023 semiconductor industry revenue to decline mid-single digits, worse than expected. Global foundry revenue to decline high-single digits, worse than expected.
7nm utilization to recover slowly in H2. Long term, RF, Wi-Fi, and connectivity demand recovery will drive healthier 7nm utilization.
N3 in volume production with high yield; strong HPC and smartphone demand; expects N3 capacity to be fully utilized this year, with N3 contributing meaningful revenue in Q3. N3E certified, targeting H2 volume production.
N2 targeting 2025 volume production; HPC and smartphone customers now engaged on N2.
US and Japan fabs on track for 2024 volume production; Kaohsiung fab to transition from 28nm to advanced nodes.
Overall, TSMC wasn't as 'resilient' as ASML, failing to defend the full-year growth target. But as the world's leading foundry, holding 50%+ gross margin and 40%+ operating margin is still formidable.
Facing relentless pursuit from Samsung and Intel, the market worries whether TSMC can defend its leadership at 2nm. Technologically I'm not concerned; I'd rather Samsung and Intel be more aggressive, putting more pressure on TSMC.
TSMC's Apple exposure was 23% at end of last year; curious now whether Apple's earnings will look ugly.