TSMC Chairman: "Cutting-Edge Processes Will Be in Taiwan, Not the US" [Taiwan Chip News]

Cutting-edge Processes Closely Linked with R&D
Advanced Technology in Taiwan, Previous Generations Abroad

"Cutting-edge semiconductor processes must first be operated in Taiwan."

On the 16th, Chairman Wei Zhejia spoke at the TSMC earnings conference call. Photo by Economic Daily News

Wei Zhejia, Chairman of TSMC, responded this way during the TSMC earnings conference call on the 16th when a foreign investor asked, "Why not move the cutting-edge process directly to the United States? Is it related to the N-2 policy?" He said, "It is unrelated to the N-2 policy." The N-2 policy is a term used by TSMC in its global production strategy. It refers to operating the most advanced semiconductor processes (N), such as 2nm (nanometer, one billionth of a meter) or 3nm, only in Taiwan, while dispersing previous generation processes (N-1, N-2) overseas. Chairman Wei explained, "Mass production of cutting-edge processes must be closely linked with research and development (R&D). This is why cutting-edge processes must be mass-produced first in Taiwan."

Regarding the U.S. government's export controls, he avoided specific comments, saying, "We are communicating closely with both the current and future government agencies." He added, "We understand that the U.S. side places the greatest emphasis on artificial intelligence (AI), and semiconductors for automobiles or consumer electronics outside of AI are considered normal business and are likely to be approved." He also noted, "There are not many AI-related customers in China, so the impact of these factors will be limited."

Chairman Wei then addressed rumors about a decrease in orders for Chip on Wafer on Substrate (CoWoS), emphasizing, "These are just rumors, and we are continuing to expand production to meet customer demand." Regarding monopoly concerns, he said, "From the perspective of wafer manufacturing 2.0, TSMC's market share is about 38-40%, which is much lower compared to specific central processing unit (CPU) markets (75%) or AI chip sectors (95%). At this point, it is not the stage to discuss monopoly concerns."

TSMC announced that its after-tax net profit for the fourth quarter of last year reached a record high of 374.68 billion New Taiwan dollars (approximately 16.57 trillion Korean won), a 57% increase year-on-year and a 15.2% increase quarter-on-quarter. The operating profit margin reached 49%. Fourth-quarter revenue was 868.46 billion New Taiwan dollars (approximately 38.4 trillion Korean won), up 38.8% year-on-year and 14.3% quarter-on-quarter. In U.S. dollars, fourth-quarter revenue was 26.88 billion dollars, up 37% year-on-year and 14.4% quarter-on-quarter.

Annual revenue reached a record high of 2.8943 trillion New Taiwan dollars (approximately 128.0149 trillion Korean won). Operating profit was 1.3227 trillion New Taiwan dollars (approximately 58.516 trillion Korean won). During the same period, Samsung Electronics' semiconductor division revenue is estimated at 110 trillion Korean won, and SK Hynix at 66 trillion Korean won.

The revenue forecast for this year is 100 billion dollars (approximately 146 trillion Korean won), predicting another record high performance. Chairman Wei stated that with continued strong AI demand, annual revenue is expected to increase by 24-26% in U.S. dollar terms this year. He predicted that semiconductor industry inventory will recover to a healthier level and that industrial production will grow by about 10%. When asked about the possibility of achieving 100 billion dollars in annual revenue, he said, "This is just a result of natural growth, not a specially set goal or an obstacle to overcome," adding, "Next time, I might be asked about the possibility of reaching 200 billion dollars."

Investment scale is also expected to reach a record high. TSMC expects capital expenditures this year to be a record 38 to 42 billion dollars. Last year's fourth-quarter capital expenditure was 29.76 billion dollars, slightly below the previous estimate (over 30 billion dollars). TSMC projected first-quarter revenue this year at 25 to 25.8 billion dollars, a 32% increase compared to 18.87 billion dollars in the first quarter of last year. Assuming an exchange rate of 32.8 New Taiwan dollars per U.S. dollar, the operating profit margin is expected to be 46.5-48.5%.

Taiwan Economic Daily News = In Huizhong, Lin Yilu, Yang Lingwen / Translation = Asia Economy