Counterpoint: TSMC's 7/6nm production capacity will drop by 10%~20%

According to market research firm Counterpoint, TSMC's 7-nanometer and 6-nanometer capacity utilization rates will drop by 10% to 20% to 80% to 90% in the first half of next year. Until the third quarter of 2022, TSMC's 7/6nm node is its largest revenue component.

TSMC pointed out in the recent legal meeting that due to the weakening of terminal markets such as smartphones and PCs, as well as the delay of customers' product schedules, starting from the fourth quarter, TSMC's 7-nanometer and 6-nanometer capacity utilization rates will no longer be at the level of the past three years. The highs are expected to continue into the first half of next year as semiconductor supply chain inventories take several quarters to rebalance to healthier levels.

Previously, TSMC has adjusted its capital expenditures for 7-nanometer and 6-nanometer accordingly, including the cancellation of the new 7/6-nanometer production line of No. 22 plant due to uncertain market demand to adjust the construction schedule of the Kaohsiung 7-nanometer fab. TSMC believes that the demand for 7nm and 6nm is more inclined to cyclical factors rather than structural phenomena, and is expected to pick up in the second half of next year.

Counterpoint judges that the adjustment of AP and SoC inventory for 5G smartphones may continue into next year, which is the main reason for the decline in TSMC's 7nm and 6nm capacity utilization rates, and TSMC's statement has reconfirmed this market change. Due to weak sales in the smart terminal market, before the demand for 5G smartphone AP and SoC orders has recovered, TSMC's 7nm and 6nm capacity utilization rates in the next 2 to 3 quarters may drop to 80 to 90%, until WiFi and RF are included. When new orders such as chips and SSD control ICs start to be put into production, the utilization rate will rebound significantly.