TSMC acknowledged at its Q3 2022 investor meeting that inventory headwinds will hit its near-term sales outlook as utilization declines at certain nodes. This echoes the company’s conservative view of delaying new capacity construction during the global semiconductor downturn, including the withdrawal of a new 7/6nm line at Plant 22 due to uncertain market demand.
TSMC’s 7/6nm node is its largest revenue component through the third quarter of 2022, contributing nearly 30% of revenue in the first three quarters of 2022. in total, TSMC has 145-150 KWPM (thousand wafers per month) of installed capacity on 7/6nm in the first half of 2022 but will adjust production plans for some equipment tools in the second half of 2022, in part taking into account the deterioration of smartphone and PC market demand.
According to Counterpoint analysis, high-performance computing-related products (including PC and server CPUs, discrete GPUs, data center gas pedals and ASIC/FPGA) account for 38% of TSMC’s 7/6nm products in 2022, followed by smartphone-related (mainly AP/SoC) chipsets at 32%. MediaTek, AMD and Qualcomm are likely to be the top three customers in this category.
Reviewing the inventory levels of smartphone AP/SoC as the main application of the advanced foundry node (10nm and below), Counterpoint believes that in the case of weakening end market (sales) data, from the second half of 2022, chip suppliers will face greater pressure on order corrections. Chip production cycles for advanced nodes are more than four months long, resulting in a lag effect of reduced wafer production for smartphone AP/SoC, CPU/GPU and AI processors starting as early as the fourth quarter of 2022.
However, Counterpoint agrees with TSMC that the 7/6nm node will see positive drivers for new product migration, such as Wi-Fi, RF and SSD controller ICs, after the 2023 inventory cycle.
