TSMC's Sales of 5/4nm Chips Expected to Increase by NT$100 Billion, While 5nm Continues to Bear Heavy Burden for Maintaining Gross Margin

According to a report from Taiwan's Electronic Times, industry insiders predict that TSMC's revenue growth this year will be roughly the same as last year, but the sales of 5/4nm chips will increase by NT$100 billion (approximately $3.3 billion USD).

TSMC's total sales of 5/4nm chips in 2022 were NT$587.6 billion, and this year, the revenue from this segment could reach close to NT$700 billion.

Insiders point out that TSMC's 5nm process has become the "golden goose" for foundries. The wafer pricing of TSMC's 5nm process is $5,000 higher than that of the 7nm process, and the sales proportion of 5/4nm chips has surpassed that of 7/6nm. The estimated wafer pricing for TSMC's 5/4nm process is about $15,000, and recent orders for this process have significantly increased, such as Nvidia's A100, H100 AI GPUs, and the A800 processor targeting mainland China.

In addition, TSMC will begin mass production of N3E (an enhanced version of N3) in the second half of this year, which is expected to generate substantial revenue for the company. It is estimated that by the end of 2023, the sales of 3nm process will account for 5% of TSMC's total foundry revenue, and this proportion will further increase by 2024. However, the 5nm process series will continue to bear a heavy burden in order to maintain TSMC's 53% gross margin each year.

The recovery of utilization rates for TSMC's 16/12nm and 28/22nm processes will be another positive factor for the company's revenue recovery in the second half of this year. Both of these platforms account for 10% of TSMC's total foundry revenue.

TSMC's various factories show signs of recovering capacity utilization rates. Insiders predict that due to significant adjustments to customer orders, the capacity utilization rate of Fab 14 B, which provides the 16/12nm process, is expected to rebound to over 80% from Q3. The capacity utilization rate of 15 A, which mainly produces the 28nm process, will recover from 85-90% in Q2 to 100% in the second half of this year. The capacity utilization rate of 15 B, which mainly produces the 7/6nm process, had fallen below 40% but is expected to gradually recover in the second half of this year.