TSMC sees a long-awaited surge! Is the semiconductor industry on the verge of a new dawn?

Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest chip foundry, saw its revenue in October increase year-on-year for the first time since February this year. Is this a turning point for the semiconductor industry? TSMC's stock price on the Taiwan Stock Exchange rose more than 4.1% today, reaching NT$580, the largest single-day increase since May.

On Friday, November 10th, TSMC released its revenue report for October. The report showed that TSMC's consolidated revenue for October was NT$243.203 billion (approximately RMB 54.964 billion), an increase of 34.8% compared to the previous month and an increase of 15.7% compared to the same period last year. This is also the first time TSMC has seen a year-on-year increase in monthly revenue since February this year.

Analysts believe that this also indicates that the global chip market is gradually recovering from its low point. Boosted by this news, TSMC's stock on the US market rose 6.35% last Friday, marking the largest single-day increase since May. Today, TSMC's stock on the US market fell slightly by 0.4% before the market opened.

In October of this year, TSMC expects its revenue and profit for the fourth quarter to continue to exceed analysts' expectations. This relatively optimistic guidance indicates that TSMC believes the turning point for the semiconductor market is just around the corner and that signs of stabilization in demand for smartphones and personal computers are already emerging. The demand in the field of artificial intelligence will be a long-term growth driver for TSMC.

TSMC revealed that AI applications currently account for only 6% of its revenue, but it is expected that this segment will grow at an average annual rate of 50% over the next five years.

In recent weeks, both Intel and Samsung have also stated that the worst period for the chip industry is behind us. Samsung's revenue in the third quarter declined by 12% year-on-year, but its net profit of KRW 55 trillion far exceeded expectations, and the loss in its key chip business narrowed significantly. Samsung has delivered its best performance so far this year.

Samsung stated that the memory chip market is expected to recover, and it is projected that DRAM demand will increase by 2024. Kim Jae-june, the executive in charge of Samsung's memory chip business, said:

"We believe that the current recovery momentum will continue into next year."

TSMC's CoWoS Advanced Packaging Demand May Experience a Boom

On November 13th, media reports stated that there is strong demand in the market for TSMC's CoWoS packaging technology. In addition to NVIDIA, which has already confirmed an expansion of orders in October, heavyweight customers such as Apple, AMD, Broadcom, and Marvell have also recently placed significant additional orders. Media reports indicate that in order to meet the demands of the five major customers mentioned above, TSMC has been working hard to accelerate the expansion of its CoWoS advanced packaging capacity. It is expected that the monthly production capacity will increase by about 20% to reach 35,000 wafers next year, surpassing the original target. Industry insiders believe that the large orders from TSMC's five major customers indicate that AI applications are flourishing and driving the demand for AI chips.

It is reported that NVIDIA is currently the main customer for TSMC's CoWoS advanced packaging, accounting for nearly 60% of the related capacity. This includes the application of AI chips such as H100 and A100.

At the same time, AMD's latest AI chip products are currently in mass production, and the MI300 chip, which is expected to be launched next year, will adopt two advanced packaging structures: SoIC and CoWoS.

In addition, Xilinx, a subsidiary of AMD, has also been a major customer for TSMC's CoWoS advanced packaging. As the demand for AI continues to increase in the future, Xilinx, Broadcom, and other companies have also started to increase their demand for CoWoS advanced packaging capacity from TSMC.

Wei Zhejia once pointed out that the increase in demand for advanced packaging capacity from customers is not due to the high price of advanced semiconductor processes, but rather the customers' need to improve system performance, including transmission speed and power consumption reduction.

In the short term, TSMC faces the challenge of how to increase production capacity to meet the rapid growth of AI demand. Due to the tight supply of CoWoS advanced packaging capacity, the shipment volume of AI chips is affected.

As chip sizes continue to shrink, it becomes increasingly important to find smarter ways to assemble different types of chips together, especially for applications with high demands like AI.

TSMC's goal is to double the capacity of CoWoS next year, but achieving this goal also depends on the capabilities of its equipment suppliers. As the delivery time for CoWoS equipment is still as long as 8 months, media reports indicate that TSMC has started to retrofit its equipment in November and has initiated the integration of fan-out wafer-level packaging (InFO).