TSMC: Foundry 2.0 Could Supercharge Growth

Summary:

  • TSMC experienced weakness in 2023 but is expected to recover in the second half with strong orders for its 3nm process technology, leading to robust growth in 2024.
  • Foundry 2.0 expands TSMC’s market opportunity to $250 billion in 2023, including front-end foundry services, back-end services, and IDM opportunities.
  • TSMC’s integration of foundry and OSAT services, along with strong process technology capabilities, customer partnerships, and AI factors, positions the company for continued growth and market share expansion.

The Taiwan Semiconductor Manufacturing Company (TSMC) plant.

BING-JHEN HONG/iStock Editorial via Getty Images

In our previous analysis, we highlighted Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) (OTC:TSMWF) weakness in 2023 due to low utilization rates amid PC and smartphone market weakness but benefiting

Foundry Market Revenues ($ mln)

2015

2016

2017

2018

2019

2020

2021

2022

2023

8Y Average

Total

53,227

61,407

68,098

65,493

68,567

83,995

109,944

140,914

117,409

Growth %

15.4%

10.9%

-3.8%

4.7%

22.5%

30.9%

28.2%

-16.7%

11.5%

OSAT Market Share ($mln)

2015

2016

2017

2018

2019

2020

2021

2022

2023

Average

Total

26,585

30,431

34,582

38,639

38,421

45,155

56,128

59,235

57,473

Growth %

9.2%

14.5%

13.6%

11.7%

-0.6%

17.5%

24.3%

5.5%

-3.0%

10.5%

IDM Company (Revenue)

2019

2020

2021

2022

2023

Average

Intel Corporation

71,965

77,867

79,024

63,054

54,228

Samsung Electronics

23,900

25,710

24,760

25,040

25,960

Texas Instruments (TXN)

14,383

14,461

18,344

20,028

17,519

STMicroelectronics

9,529

10,181

12,729

16,083

17,239

Infineon Technologies

8,752

10,046

13,932

17,242

17,242

ON Semiconductor (ON)

5,518

5,255

6,740

8,326

8,253

NXP Semiconductors

8,877

8,612

11,063

13,205

13,276

Renesas Electronics (OTCPK:RNECF)

6,610

6,931

8,635

11,434

10,423

Analog Devices

5,991

5,603

7,318

12,014

12,306

Microchip Technology (MCHP)

5,274

5,438

6,821

8,439

7,634

ROHM Co. (OTCPK:ROHCF)

3,375

3,250

3,714

3,825

3,091

ams-OSRAM AG (OTCPK:AMSSY)

2,114

4,281

5,734

5,160

3,963

Qorvo (QRVO)

3,239

4,015

4,646

3,569

3,770

IDM Sales ($ mln)

169,527

181,650

203,460

207,419

194,904

Growth %

7.0%

12.4%

2.7%

-6.2%

4.0%

Fabless

% of TSMC Revenue (2023)

Fabless Payment to TSMC ($ mln)

% Fabless Company Revenue

AMD

7%

4,929

21.7%

Broadcom (AVGO)‎

5%

3,521

9.8%

MediaTek‎ (OTCPK:MDTTF)

5%

3,521

24.9%

NVIDIA (NVDA)

11%

7,746

12.7%

QUALCOMM (QCOM)

7%

4,929

13.8%

Average

16.60%

IDM Company (Revenue)

2019

2020

2021

2022

2023

Average

IDM Sales ($ mln)

169,527

181,650

203,461

207,420

194,903

Total Foundry and OSAT % of Fabless Revenue Estimate

40.4%

40.4%

40.4%

40.4%

40.4%

IDM (Foundry/OSAT) Market Opportunity

68,423

73,316

82,119

83,717

78,665

Growth %

7.2%

12.0%

1.9%

-6.0%

3.8%

IDM Company (Revenue)

2019

2020

2021

2022

2023

Average

IDM Sales ($ mln)

169,527

181,650

203,461

207,420

194,903

Total Foundry and OSAT % of Fabless Revenue Estimate

40.4%

40.4%

40.4%

40.4%

40.4%

IDM (Foundry/OSAT) Market Opportunity

68,423

73,316

82,119

83,717

78,665

Foundry

68,567

83,995

109,944

140,914

117,409

OSAT

38,421

45,155

56,128

59,235

57,473

Total Market Opportunity

175,412

202,465

248,191

283,865

253,547

Growth %

15.7%

23.0%

14.8%

-10.8%

10.7%

Front End and Back End

SMIC

GlobalFoundries

UMC

TSMC

Samsung

Intel

Oxidation and Coating (Front End)

Yes

Yes

Yes

Yes

Yes

Yes

Lithography (Front End)

Yes

Yes

Yes

Yes

Yes

Yes

Etching (Front End)

Yes

Yes

Yes

Yes

Yes

Yes

Doping (Front End)

Yes

Yes

Yes

Yes

Yes

Yes

Metal Deposition

(Front End)

Yes

Yes

Yes

Yes

Yes

Yes

Wafer Bumping

(Back End)

No

No

No

Yes

Yes

Yes

Wafer Sort (Back End)

No

No

No

Yes

Yes

Yes

Assembly (Back End)

No

No

No

Yes

Yes

Yes

Testing (Back End)

No

No

No

Yes

Yes

Yes

Frontend Score

1 (4/5)

1 (5/5)

1 (5/5)

1 (5/5)

1 (5/5)

1 (5/5)

Backend Score

0 (0/4)

0 (0/4)

0 (0/4)

1 (4/4)

1 (4/4)

1 (4/4)

Integration Scaling Factor Score

0.00

0.00

0.00

1.50

1.50

1.50

TSMC Revenue Projections ($ mln)

2023

2024F

2025F

2026F

Wafer Revenue

60,438

76,892

97,826

124,459

Growth %

27.2%

27.2%

27.2%

OSAT Revenue

8,529

9,817

11,301

13,009

Growth %

15.1%

15.1%

15.1%

Others

1,453

1,449

1,445

1,441

Growth %

-0.3%

-0.3%

-0.3%

Total Revenues

70,419

88,158

110,571

138,908

Total Growth %

-4.4%

25.2%

25.4%

25.6%

TSMC Market Share

2023

2024F

2025F

2026F

2027F

2028F

IDM (Foundry/OSAT) Opportunity (Base Case)

100,251

109,074

118,672

129,115

140,477

152,839

Foundry

117,409

131,616

147,542

165,394

185,407

207,841

OSAT

57,473

61,381

65,555

70,012

74,773

79,858

Total Opportunity (Base Case)

100,251

109,074

118,672

129,115

140,477

152,839

Growth %

8.8%

8.8%

8.8%

8.8%

8.8%

TSMC Revenue

70,419

88,158

110,571

138,908

167,387

194,841

Growth %

-4.4%

25.2%

25.4%

25.6%

-4.4%

25.2%

TSMC Market Share (Foundry 2.0)

26%

29%

33%

38%

42%

44%


Analyst’s Disclosure: I/we have a beneficial long position in the shares of TSM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

No information in this publication is intended as investment, tax, accounting, or legal advice, or as an offer/solicitation to sell or buy. Material provided in this publication is for educational purposes only, and was prepared from sources and data believed to be reliable, but we do not guarantee its accuracy or completeness.

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