TSMC Orders Rebound, Q1 Revenue Decline 5-7%

Semiconductor industry reports indicate a notable 14.4% quarter-on-quarter revenue surge for Taiwan Semiconductor Manufacturing Company (TSMC) in the fourth quarter of 2023, signifying a consistent uptick in customer orders. Projections for January and February 2024 suggest a comprehensive rebound in capacity utilization.

Particularly noteworthy is the swift recovery of TSMC's previously challenged 8-inch fabs, with manufacturers estimating their average capacity utilization to reach 70-80% in the first two months of 2024. Simultaneously, 12-inch fabs are surpassing the 80% threshold. The 28nm process has returned to standard levels, while the 7/6nm processes, which experienced a dip below 50% in the past 18 months, have now ascended to 75%. The 5/4nm family is exhibiting performance beyond expectations, nearing full capacity. Quotes for the 3nm process have exceeded $20,000 in January, with an estimated utilization rate surpassing 85% in Q1.

Processes below 7nm contribute approximately 60% to TSMC's revenue, and this percentage is anticipated to rise with the expansion of 5/3nm capacity, playing a pivotal role in achieving a yearly revenue growth exceeding 20%.

Despite the semiconductor industry falling short of the anticipated full recovery in Q2 2023, the supply chain successfully concluded its destocking phase in the latter half of the year. However, persistent weak demand, attributed to broader economic conditions and challenges in the Chinese market, has hindered the envisioned V-shaped rebound, as acknowledged by TSMC.

Insights from semiconductor equipment manufacturers project a Q1 2024 revenue decline of around 5-7%, factoring in sustained growth performance in Q4 2023 and heightened momentum in equipment material shipments. Exchange rate fluctuations remain a key consideration. Gross profit margins continue to be influenced by factors such as the ascent to 3nm, with an aim to achieve a 51% margin.