On January 18, Taiwan, China Semiconductor Manufacturing Giant Taiwan Integrated Circuit Manufacturing Co., Ltd. (hereinafter referred to as "TSMC") announced the fourth quarter and annual financial report data of 2023. In the fourth quarter of 2023, TSMC's combined revenue was approximately NT $625.53 billion (approximately RMB 143.246 billion), an increase of 14.4% year-on-year and unchanged month on month. The net profit was NT $238.71 billion (approximately RMB 54.665 billion), an increase of 13.1% month on month and a decrease of 19.9% year-on-year.
Meanwhile, TSMC's annual revenue for 2023 was NT $2161.74 billion (approximately RMB 495.038 billion), a year-on-year decrease of 4.72%. The net profit attributable to the listed company was NT $838.5 billion (approximately RMB 191.178 billion), a year-on-year decrease of 21.23%. The net profit margin is 38.8%, a decrease of 6.1 percentage points from 44.9% in 2022.
As of the time of publication, TSMC's stock price was $102.95 per share, up 1.26%.
Advanced processes drive revenue
From a technical perspective, TSMC's advanced processes still have a significant driving effect on performance. The 3nm (nano) process technology accounted for 15% of TSMC's total wafer revenue in the fourth quarter of 2023, while 5nm and 7nm accounted for 35% and 17% of the total wafer revenue, respectively. Advanced processes (7nm and below) account for 67% of the total wafer revenue.
In recent years, TSMC's cooperation with the industry in advanced processes, especially 5nm, 3nm, and sub 3nm processes, has led to a continuous increase in TSMC's performance. Although competitors Samsung Electronics and Intel have similar layouts in advanced manufacturing processes, TSMC has control over two major customers, Apple and Nvidia, which have made significant contributions to TSMC's revenue. From the revenue structure for the entire year of 2023, it can be seen that TSMC's revenue from North American customers accounted for 68% of the total net revenue, while its smartphone business and high-performance computing (HPC) business accounted for 43% and 38% of the total revenue, respectively.
Market analysis firm Counterpoint commented on TSMC's fourth quarter performance, stating that TSMC's 3nm nodes accounted for 6% of its wafer revenue in the third quarter of 2023, thanks to Apple's push. As more HPC customers such as Qualcomm and MediaTek adopt 3nm technology in 2024, the company's revenue growth in the 3nm process is expected to continue.
TSMC President Wei Zhejia pointed out at a performance briefing held in the second half of 2023 that the company's 3nm process yield is good, and TSMC's N2 technology research and development in the 2nm process is progressing smoothly, and will enter mass production as scheduled in 2025.
AI up, car down
At the performance briefing held on the 18th, Wei Zhejia released an outlook for the overall market in 2024. He pointed out that he is still optimistic about the overall semiconductor industry this year. Wei Zhejia estimates that the output value of the semiconductor industry (excluding the memory industry) is expected to grow by more than 10% this year, and the wafer foundry industry will grow by 20% annually. It is expected that TSMC will have the opportunity to deliver an annual growth of 21% to 25% in revenue in US dollars in 2024, driven by demand for artificial intelligence (AI) and HPC.
From Wei Zhejia's judgment, it can be seen that TSMC has focused its revenue this year on the AI and HPC fields, while the automotive chip foundry business, which previously saved multiple semiconductor giants from performing poorly in the semiconductor cycle, has not been nominated.
From the perspective of revenue structure, the proportion of IoT and automotive businesses to TSMC's total revenue is also declining. In the fourth quarter of 2023, the automotive business accounted for 5% of TSMC's total revenue, which remained unchanged month on month and decreased by 1 percentage point year-on-year. The proportion of IoT business to overall revenue in the fourth quarter was 5%, a decrease of 4 percentage points month on month and 3 percentage points year-on-year.
Counterpoint analysis suggests that automotive and industrial applications experienced inventory adjustments in the third quarter of 2023, and it is expected that the inventory adjustment period will continue until the first quarter of 2024. The challenges TSMC will face in 2024 include slow growth of non AI and HPC, as well as weak demand in the automotive industry.
As for artificial intelligence, news shows that TSMC is actively increasing its system level integrated single chip (SoIC) production capacity plan, with plans to increase monthly production capacity to 5000-6000 units by the end of 2024 to meet strong demand for future AI and HPC. Currently, AMD and Apple are very interested in TSMC's SoIC products. The former is the first customer of TSMC's SoIC, while the latter plans to combine SoIC chips with thermoplastic carbon fiber board composite molding technology and apply it to products such as Mac and iPad.
Brady Wang, Assistant Director of Counterpoint Research, believes that TSMC's strong growth in 3nm processes and AI applications has made it a major beneficiary of the AI semiconductor field. The market is expected to see strong growth in AI applications in 2024, highlighting TSMC's key role in providing advanced 5nm and 3nm technologies to enhance artificial intelligence computing devices, strengthening its leading position and industry best position in this field.