TSMC (2330), one of the leading foundries in the semiconductor industry, held its Q2 2022 press conference on July 14th and announced its Q2 financial results, which showed net income after tax of approximately NT$237.03 billion, an increase of approximately 16.92% quarter-over-quarter, an increase of 76.4% year-over-year, and an after-tax earnings per share of NT$9.14, which is better than the market's expectation. Despite the decline in demand for end-user consumer electronics products and the inventory restructuring of customers in the next few quarters, TSMC's leading edge in technology, strong demand for high-performance computing, and solid customer relationships will continue to drive revenue growth. The following is a summary of the five key points of TSMC's press conference:

1.TSMC's long-term growth target remains unchanged as the semiconductor chain enters a period of adjustment.

According to TSMC President Richard Weil, the high inventory in the semiconductor supply chain is mainly due to the weakening demand in the smartphone, PC and consumer terminal markets, which will take a few quarters to rebalance. The current semiconductor cycle is similar to a "typical cycle," and it is expected that inventory adjustments may continue into the first half of 2023. However, TSMC is confident that the industry's inventory adjustments will continue to be a year of growth, and that the company's target of achieving an annual compounded growth rate of 15% to 20% over the next few years will continue to be met.

2. 2022Year-on-year revenue growth in US dollars, mid-thirties percent

Chieh-Wei emphasized that demand for data centers and automotive applications remains stable, TSMC's capacity utilization rate will remain healthy, and TSMC continues to maintain its leading position in the foundry industry, where capacity is still in short supply. Regarding this year's revenue growth forecast, Mr. Wei said that he has raised the forecast from 30% to a stronger outlook of "mid-thirties percentage range", which means that this year's annual revenue growth is expected to reach 35%.

3. 2022The capital expenditure portion of the year is deferred to 2023.

Due to the shortage of chips and components from equipment suppliers, the lead time has lengthened significantly, and capital expenditures will fall to $40 billion this year, with some of the expenditures deferred to next year. Mr. Wei also said that even with inventory adjustments and external uncertainties, TSMC's capacity in advanced manufacturing processes and technology leadership will remain tight.

4.Long-term gross profit margin of 53% or more can be realized.

TSMC indicated that it is currently facing challenges such as rising costs of raw materials, utilities, and machinery caused by inflation, increasing complexity of advanced manufacturing processes, investment in mature manufacturing processes, and expansion of overseas production sites. If we exclude the impact of uncontrollable foreign exchange rates and focus on other profitability factors, TSMC's goal of a gross margin of more than 53% can still be achieved over the long term.

5. N3Stabilized production in 2023, N2 to be mass-produced in the second half of 2025.

Driven by HPC and smartphone related applications, 3nm process is another long-term growth node after 5nm, and will be on track for mass production in the second half of the year according to the progress, with good yields emphasized. In addition, Mr. Wei said that the development of 2nm is on schedule, and it is expected that risky trial production will be conducted at the end of 2024 at the earliest, and mass production will be carried out in the second half of 2025 or at the end of the year.