To The Moon

TSMC will be reporting its 4Q22 result on 12 Jan 2023. Given that TSMC has already reported its October and November 2022 revenue, the 4Q22’s revenue should be largely in line with the Management’s mid-point guidance. The Gross Margin (GM) should not deviate too much from Management’s guidance too, despite lower fab capacity utilization rate.

Nonetheless, TSMC is expected to give cautious guidance on the next quarter’s revenue due to a deeper utilization cut in leading-edge nodes affected by PC and Smartphone order cuts. GM most likely will decline to 52-53% in 1Q23 with further deterioration in utilization rate in N5 and N7 fab capacity. The overall full year revenue guidance is also expected to be flattish or even slightly down. Given Apple is the TSMC’s largest customer, iPhone 14 and other Apple’s products demand slump will most likely affect TSMC’s N4/N5 orders as well. 2Q23’s demand for N7 and mature nodes also looks uncertain given the no clear sign of inventory restocking and continued weakness in the consumer electronics market.

Despite these short-term challenges, TSMC is expected to see strong growth in the coming years, driven by demand for high-performance computing products. TSMC's N3E design pipeline for 2024 looks strong, with demand expected from a range of major customers. By 2024, it is expected that approximately 50% of TSMC's revenue will come from high-performance computing products, with TSMC expected to maintain its process leadership in N3 and N5.

TSMC’s leading edge nodes are enabling the development of new technologies in computing and artificial intelligence. There is many news of several design pipeline from HPC, AI, ADAS and Smartphone customers coming through for TSMC’ N3E, and N2 development schedule may come through earlier than expected. I do think TSMC’s outlook beyond 2023 still looks very promising and becoming increasingly indispensable for all key technologies.

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