TSMC is expected to make a solid recovery in 2021 as it continues to take market share from Intel. TSMC’s major customers, fabless semiconductor players such as AMD, Apple, HiSilicon, NVIDIA and Qualcomm, are currently increasing their market share, As they are growing in the end market, they will increase the order volume from TSMC in the future.
Currently, 50% of AMD chips are manufactured with the TSMC 7nm process. By 2021, nearly all AMD products should use this TSMC’s cutting-edge technology. With the transition over the next 18 months, TSMC’s revenue is expected to increase by about US$1 billion. AMD’s share of the PC/server market is expected to increase by about 40% from 2022 to 2023. The transition of market share from Intel to AMD is likely to further increase TSMC’s sales. If Microsoft and Sony will launch new Xbox and PlayStation models, respectively, AMD’s game console-related semiconductor chip sales would reach about 1 billion in the second half of 2020. All of these chips will be powered by TSMC’s 7nm+ process technology.
In China, semiconductor design makers account for about 20% of total TSMC demand, and will play a role in driving sales of TSMC as the world’s largest foundry. China foundries such as SMIC are three generations behind TSMC and face the problem that the hurdle is too high to catch up. The procurement of EUV lithographic equipment from ASML, which is indispensable for achieving the higher level of manufacturing by SMIC is prohibited by sanctions.
The US may also limit TSMC’s transactions with HiSilicon, Huawei’s semiconductor subsidiary, to halt growth in China’s semiconductor market. TSMC manufactures HiSilicon’s 5G application processor “Kirin 980” in 7nm process, and HiSilicon is said to be the largest customer for TSMC after Apple.
The possibility that the U.S. will limit TSMC’s dealings with HiSilicon is likely to be a negative factor for TSMC in the short term. China seeks to increase manufacturing self-sufficiency. This development continues, and even if the US restricts exports, TSMC should be able to cope.
Currently, about one-third of TSMC production is sub-10nm, but with the increase of 5nm production, the production of sub-10nm process is expected to reach nearly 50% by the end of the year. Meanwhile, TSMC’s competitors remain at 10nm+, with the exception of Samsung. In 2018, GLOBALFOUNDRIES, the third largest foundry, decided to abandon the development of advanced processes and focus on older generation processes. Many of Intel’s products are limited to 14nm process applications. Intel’s 14nm process is roughly equivalent to TSMC’s 10nm process, but TSMC is currently leading at 7nm. The state-of-the-art processes are driving foundry growth. AMD, NVIDIA, Qualcomm and others are unifying key products into state-of-the-art processes to help advance technology as a whole.