TSMC Q4 2024 Earnings Call Q&A: AI Demand, Overseas Expansion, and Long-Term Outlook
Live Track
16 Jan
Q1: What is TSMC's long-term strategy for US expansion, especially regarding latest node investments?
A: - TSMC's strategy for overseas expansion is driven by customer needs and government support. - The company will continue to ramp up new technologies first in Taiwan due to the proximity to R&D. - TSMC maintains open communication with both current and future US administrations. - The company views IDM fabs as customers and partners, not potential acquisition targets.
Q2: How should we think about gross margins in this cycle? Can TSMC reach over 60% gross margin?
A: - Gross margins depend on six factors, with utilization being a key driver. - Reaching 60% or higher gross margin is not impossible if utilization is extremely high. - US fabs are more expensive due to smaller scale, higher supply chain costs, and early-stage ecosystem. - Overseas fabs are expected to cause 2-3% dilution annually for the next five years.
Q3: What's the outlook for traditional applications like PCs and smartphones in 2025?
A: - PC and smartphone markets are expected to see mild growth in 2025. - AI functionality in smartphones will increase silicon content and potentially shorten replacement cycles. - Advanced technologies are needed to integrate AI functions, driving demand for TSMC's leading-edge nodes.
Q4: How is TSMC managing the impact of new US export restrictions on China's AI business?
A: - Initial analysis suggests the impact is manageable and not significant. - TSMC is applying for special permits for affected customers, especially in non-AI areas like automotive.
Q5: What is TSMC's perspective on the large addressable market for AI custom chips mentioned by hyperscalers?
A: - TSMC confirms that AI demand, including for custom chips, is very strong. - Both ASIC and GPU solutions for AI require leading-edge technology, which TSMC provides.
A: - Overseas fab expansion will impact margins by 2-3 percentage points annually for the next five years. - Macroeconomic uncertainties may affect end-market demand. - TSMC aims to earn a healthy return to support continued investment and deliver profitable growth.
Q7: How is TSMC working to mitigate the cost gap between overseas and Taiwan fabs?
A: - TSMC is continuously improving cost structures in both Taiwan and overseas fabs. - The company is exploring new methodologies to minimize the cost gap. - While working to narrow the gap, overseas fabs will still have higher costs than Taiwan fabs.
Q8: What is TSMC's outlook for CoWoS capacity ramp in 2025?
A: - TSMC is working hard to meet customer demand for CoWoS capacity. - There have been no order cuts; instead, demand continues to increase. - The company is actively working to increase CoWoS capacity.
Q9: Is there potential for AI-related demand to exceed or fall short of TSMC's 2025 forecast?
A: - TSMC hopes for upside but is focused on supplying enough capacity to support demand. - The company forecasts AI-related revenue to double in 2025 after more than tripling in 2024. - Long-term AI-related revenue growth is projected at around 40% CAGR over five years.
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