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Will Upcoming TSMC’s 3nm Bring ASIC Miner Back to Peak

TSMC released its fourth-quarter results yesterday. Despite its poor first-half results, the company rebounded in the second half, with a net income of $10.39 billion at the end of the fourth quarter, exceeding performance expectations by more than $100 million. TSMC attributed 8.3% growth to high-end smartphones, initial 5g deployment, and high-performance computing-related applications adopting TSMC’s latest cutting-edge 7nm craftsmanship.

TSMC’s 7nm was put into production in 2018, and the capacity continueS to increase in 2019. In the fourth quarter, it accounted for 35% of total wafer shipments. In terms of revenue, this is the second-highest market share node in the past 10 years, only one quarter was surpassed by 28nm node as the utilization rate of 7nm nodes is lower than expected.

Throughout the year, TSMC’s gross profit margin fell by 2.3%, mainly due to low capacity utilization in the first half of 2019. However, as N7 enters its third year, it seems to be the most successful node of TSMC so far. TSMC’s 10 nm nodes, as half nodes and output learning nodes, almost disappeared, accounting for only 1% of the total wafer revenue. TSMC’s first FinFET node, 16nm, is still a powerful and persistent node due to its maturity, cost and ecosystem. This node still accounts for 20% of wafer revenue in the fourth quarter.

TSMC’s operating expenses, including researching expenses, increased by about $120 million, due to the increase in researching expenses related to future 5nm and 3nm nodes, as well as the preparation for the initial production of 5nm nodes.  TSMC’s capital expenditure reached $5.6 billion in the fourth quarter. TSMC’s annual capital expenditure was $14.9 billion. By contrast, Intel’s capital expenditure in 2018 is $15.2 billion, and its planned capital expenditure in 2019 is about $16 billion (the actual figure will be released on January 23).

TSMC expects that in the next few years, 5G applications and strong demand for high-performance computing will drive a strong demand for its advanced technologies. TSMC expects to spend between $15 billion and $16 billion in capital expenditure, in 2020, 80% of which will be spent on advanced technologies (7nm, 5nm and 3nm), 10% on specialized technologies and the remaining 10% on advanced packaging.

Last year, TSMC announced the launch of N6 nodes, which is an EUV-based node, but unlike N7 + which was launched in the second year, N6 is designed as an easy migration path from N7 because its design rules are fully compatible with N7. In fact, TSMC believes that N6 is part of the “N7 family”. It is said that compared with N7, the density of N6 is increased by about 15-20% with the power consumption is improved, although no equal power or speed comparison is provided.

TSMC reported that N6 will enter the stage of risk production in the first quarter of this year, and is expected to achieve mass production by the end of this year. By 2020, 7nm series chips are expected to contribute more than 30% of wafer revenue.

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