TSMC 4Q24 Earnings Conference Highlights
In addition to the earnings report summary compiled in our slide, here are highlights extracted from the conference Q&A session by AI.
For detailed information, please refer to TSMC’s website:
1. TSMC’s Future Strategy in the U.S.
Question: Will TSMC consider investing in the latest node in the U.S.? What discussions have been had with the incoming U.S. administration?
Answer:
TSMC prefers ramping new nodes in Taiwan due to its proximity to R&D.
Expansion decisions are based on customer demand and government support.
TSMC maintains open communication with the U.S. government.
2. U.S. Fab Cost and Gross Margin Impact
Question: Can TSMC achieve a gross margin above 60% in this cycle? What is causing cost dilution in U.S. fabs?
Answer:
Gross margins depend on utilization and various cost factors.
U.S. fabs face higher costs due to smaller scale, higher supply chain costs, and early-stage ecosystem.
Expected 2-3% margin dilution per year from overseas fabs.
3. Growth Outlook for Traditional Applications (PCs & Smartphones)
Question: What is the outlook for PCs and smartphones aside from AI?
Answer:
AI integration into smartphones and PCs will drive higher silicon content and shorter replacement cycles.
Despite single-digit unit growth, technological advancements will fuel revenue.
4. AI-Related Business & Memory (HBM) Integration
Question: What are the opportunities for HBM and controllers in AI accelerators?
Answer:
TSMC is working with all major memory suppliers.
High-volume HBM production is expected within 6 to 12 months.
5. Impact of U.S. AI Chip Export Restrictions on China
Question: How will new U.S. AI chip export restrictions affect TSMC’s business?
Answer:
Initial analysis suggests a manageable impact.
TSMC is applying for special export permits for restricted customers.
6. Silicon Photonics & Co-Packaged Optics (CPO)
Question: What is TSMC’s progress in Silicon Photonics and CPO?
Answer:
TSMC is actively working on silicon photonics.
High-volume production is expected in 1 to 1.5 years.
7. Arizona Fab Expansion & Pricing
Question: What is the progress of Phase 2 in Arizona? Will U.S. fabs have different pricing?
Answer:
Phase 1 is in volume production, Phase 2 is progressing, tool-in is expected in 2025. Phase 3 is to start construction soon.
U.S. wafers are priced higher due to geographic flexibility and cost structures.
8. AI ASIC Demand from Hyperscalers
Question: How does TSMC view the demand for AI ASICs from hyperscalers?
Answer:
AI demand remains very strong.
TSMC is engaged with both AI ASIC and GPU manufacturers.
9. Long-Term Gross Margin Target
Question: Why hasn’t TSMC raised its long-term gross margin target (53% and higher)?
Answer:
Overseas fab expansion (2-3% margin dilution) and macroeconomic uncertainty.
TSMC still expects 53%+ gross margin to be achievable.
10. CoWoS (Advanced Packaging) Capacity & AI Dependency
Question: Will CoWoS capacity be diversified beyond AI applications?
Answer:
AI is the primary driver for now.
Other applications (servers, smartphones) will adopt CoWoS over time.
11. Cost Gap Mitigation for Overseas Fabs
Question: What strategies are in place to reduce the cost gap between overseas fabs and Taiwan?
Answer:
TSMC is applying Taiwan’s cost-efficiency strategies to overseas fabs.
Exploring new methodologies to reduce costs.
12. AI Growth Trajectory Beyond 2025
Question: Will AI demand continue growing strongly beyond 2025?
Answer:
AI accelerator revenue is projected to grow at a mid-40% CAGR for 5 years.
Strong long-term growth is
expected, but trajectory beyond 2026 is uncertain.
13. Edge AI & On-Device AI Demand
Question: When will edge AI products (on-device AI) start ramping?
Answer:
Customers are integrating more neural processing.
5-10% increase in silicon content, leading to faster replacement cycles.
14. CoWoS Revenue & Profitability
Question: What was CoWoS's revenue contribution in 2024? Will margins improve?
Answer:
Advanced packaging contributed >8% of revenue in 2024 and will exceed 10% in 2025.
Margins are improving but still below the corporate average.
15. IDM (Integrated Device Manufacturer) Partnerships
Question: How important is IDM outsourcing to TSMC’s long-term growth?
Answer:
IDMs are important partners, not just customers.
Long-term collaborations are expected to continue.