Taiwan Semiconductor Manufacturing Co LtdFollowtsmc.com
Sentiment Score: -6
Sentiment Change: +5
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Taiwan Semiconductor Manufacturing Co Ltd Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Gross margin increased by 1.2 percentage points sequentially to 59%, reflecting a higher capacity utilization rate and productivity gains.
- Operating margin increased by 1.5 percentage points sequentially to 49%.
- The company is leveraging its fundamental competitive advantages of manufacturing technology leadership and large-scale manufacturing base to be the most efficient and cost-effective manufacturer in the region.
- The company is committed to a sustainable and steadily increase cash dividend per share on both an annual and quarterly basis.
- The company is preparing for multiple phases of 2 nanometer fabs in both Hsinchu and Kaohsiung Science Park to support the strong structural demand from customers.
- The company expects a 100 bps decrease in gross margin in Q1 to 58% at the midpoint.
- The company expects inflationary costs, including higher electricity prices in Taiwan, to impact its gross margin by at least 1% in 2025.
- The company expects a 2% to 3% margin dilution impact from the ramp-up of overseas fabs.
- The company expects its business in Q1 to be impacted by smartphone seasonality, partially offset by continued growth in AI-related demand.
- The company expects its business in Q1 to be impacted by smartphone seasonality, partially offset by continued growth in AI-related demand.
- The company expects its overall utilization rate to moderately increase in 2025.
- The company expects 2% to 3% margin dilution impact from the ramp-up of overseas fabs.
- The company expects inflationary cost, including higher electricity prices in Taiwan, to impact its gross margin by at least 1% in 2025.
- The company expects gross margin to decrease by 100 bps to 58% at the midpoint in Q1.
Q&A Highlights from Taiwan Semiconductor Manufacturing Co Ltd Earnings Call Q4 2024
- Analyst asked about the gross margin in the current cycle and whether it is possible to reach 60% or low-60s level.
- The company's gross margin is approaching 60%, and it is not impossible to reach this level again in the current cycle, as utilization is extremely high, and there are six factors affecting profitability. However, the US fab cost is more expensive due to several reasons, including smaller scale, higher price in the supply chain, and the early stage of the ecosystem, resulting in a 2% to 3% dilution from overseas fabs every year in the next five years.
- The company's gross margin is approaching 60%, and it is not impossible to reach this level again in the current cycle, as utilization is extremely high, and there are six factors affecting profitability. However, the US fab cost is more expensive due to several reasons, including smaller scale, higher price in the supply chain, and the early stage of the ecosystem, resulting in a 2% to 3% dilution from overseas fabs every year in the next five years.
- Analyst asked about the HBM base die business opportunities and the progress of TSMC's cooperation with key memory suppliers globally.
- The company is working with all the memory suppliers, and the products are coming out, but high volume and big contribution to TSMC's revenue are expected in the next half or one year.
- The company is working with all the memory suppliers, and the products are coming out, but high volume and big contribution to TSMC's revenue are expected in the next half or one year.
- Analyst asked about the impact of US export restrictions on AI-related chips on TSMC's business in China.
- C.C. Wei explained that the company doesn't expect a significant impact on its business, as it has confidence that its customers will get permission to continue operating in areas such as automotive and crypto mining, as long as they are not in the AI area.
- C.C. Wei explained that the company doesn't expect a significant impact on its business, as it has confidence that its customers will get permission to continue operating in areas such as automotive and crypto mining, as long as they are not in the AI area.
- Analyst asked about the progress of TSMC's Arizona fab and the pricing of overseas wafers.
- Jeff Su explained that the company has started volume production in the first fab and is already building the second fab. C.C. Wei added that the company charges a higher price for wafers produced in the US due to the value of geographic flexibility and the cost structure in the US. The company also plans to announce the start of construction for its third fab soon.
- Jeff Su explained that the company has started volume production in the first fab and is already building the second fab. C.C. Wei added that the company charges a higher price for wafers produced in the US due to the value of geographic flexibility and the cost structure in the US. The company also plans to announce the start of construction for its third fab soon.
- Analyst asked about the company's strategy to maintain high yield and adjust costs down during Chinese New Year.
- The company is working on internal strategies to improve cost structures and find new methodologies to minimize the cost gap between US and Taiwan. They are also focused on improving their overall fab operations to be the best in the industry.
- The company is working on internal strategies to improve cost structures and find new methodologies to minimize the cost gap between US and Taiwan. They are also focused on improving their overall fab operations to be the best in the industry.
- Analyst asked about the company's CoWoS and SoIC capacity ramp for 2025, specifically regarding market rumors of add and cut orders.
- The company assured that they are working hard to meet customer demand and that there is no plan to cut orders. They are focused on increasing capacity to meet customer needs.
- The company assured that they are working hard to meet customer demand and that there is no plan to cut orders. They are focused on increasing capacity to meet customer needs.
- Analyst asked about the inflection point for smartphone application adoption of SoIC.
- The company stated that SoIC's demand is still focused on AI applications, but adoption for PC and other areas is coming, although not yet.
- The company stated that SoIC's demand is still focused on AI applications, but adoption for PC and other areas is coming, although not yet.
- Analyst asked about the guidance provided by management for sales to double in 2025 and whether there is more upside or downside to this.
- Management stated that they have provided a good guidance for sales to double in 2025, and they believe there is still upside potential. They also mentioned that they hope to provide enough capacity to support the demand and forecast mid-40s CAGR for the next five years.
- Management stated that they have provided a good guidance for sales to double in 2025, and they believe there is still upside potential. They also mentioned that they hope to provide enough capacity to support the demand and forecast mid-40s CAGR for the next five years.
- Analyst asked about the CoWoS contribution of last year and if the margin is expected to approach or exceed the corporate average after the so-called value reflection this year.
- Management stated that advanced packaging accounted for over 8% of revenue in 2022 and is expected to account for over 10% in 2023. They also mentioned that the gross margins for advanced packaging are better than before but still below the corporate average.
- Management stated that advanced packaging accounted for over 8% of revenue in 2022 and is expected to account for over 10% in 2023. They also mentioned that the gross margins for advanced packaging are better than before but still below the corporate average.
