During the recent period, the second quarter financial reports of major wafer foundries have been released one after another. As a link between chip producers and the industry, the financial reports, shipments of wafer foundries, and their own expressions of the market situation are all important. It has high reference value. So far, the industry chain has been in the destocking cycle for more than half a year. For the time point of cycle conversion, wafer foundries have sensitive and clear judgments based on their order status.

TSMC

TSMC, the world’s largest wafer foundry and whose production process covers advanced and mature nodes, held a law conference on July 20 and announced its performance. In U.S. dollars, TSMC’s revenue in the second quarter was US$15.68 billion, a year-on-year decrease of 13.7% and a quarter-on-quarter decrease of 6.2%; net profit was US$5.925 billion, a year-on-year decrease of 26.5% and a quarter-on-quarter decrease of 13%; wafer shipments were about 12 inches 2.916 million films, down 23.2% year-on-year and 9.6% month-on-month. TSMC expects third-quarter revenue to be between US$16.7-17.5 billion, gross margin to be between 51.5% and 53.5%, and operating margin to be between 38% and 40%.

Regarding the future trend, TSMC pointed out at the conference that the inventory of downstream manufacturers has returned to a healthy level. However, given that the terminal demand has not yet been significantly driven, manufacturers are becoming more conservative and continue to lower the safety inventory level. In addition to AI demand, other semiconductors are still in the doldrums for one to two quarters. In response to short-term uncertainties, TSMC has moderately scaled back its capital expenditure plan, setting it at a low value of US$32-36 billion planned earlier this year, while most of the expenditure is still used for advanced manufacturing processes. In the face of industrial adjustments, TSMC also adjusted its full-year revenue forecast from a decline of 1%-6% to a decline of 10%.

However, as the most competitive wafer foundry, TSMC’s single wafer revenue (12-inch equivalent) in the second quarter was as high as US$5,377 in the case of an overall weak market, which was higher than last year’s US$4,780. 12.48%. The reason why the price can be increased is that TSMC has unique competitiveness in the field of advanced manufacturing. According to TSMC’s second-quarter financial report, 5/7 nanometers accounted for more than 50% of TSMC’s revenue. With the rise of the AI wave, TSMC expects that AI acceleration chips will account for 11%-13% of its revenue. Low ten percent. TSMC’s advanced manufacturing process has also secured orders other than mobile phone chips, thereby consolidating the long-term performance growth trend.

UMC

UMC announced a more specific second-quarter performance at the conference on July 26, with revenue of NT$56.229 billion, a quarter-on-quarter increase of 3.85%, but a year-on-year decrease of 21.87%; operating profit of NT$15.675 billion, a quarter-on-quarter increase 8.25%, a decrease of 44.34% year-on-year; the shipment of wafers in the quarter was about 1.83 million 8-inch pieces, a slight increase of 0.27% from the previous quarter, and a decrease of 30.17% from the same period last year.

At present, the demand for consumer electronics is yet to recover, resulting in continued weakness in UMC’s 8-inch capacity utilization rate, which is still around 50%. But the bright spot is the 12-inch 28nm process. In addition to receiving urgent orders from Japanese factories, it is also driven by the demand for OLED DDI, so the utilization rate remains at a high level. In contrast, the remaining 12-inch parts, including 40nm and 55nm capacity utilization, are still weak. Looking forward to the third quarter, UMC expects wafer shipments to decrease by 3%-4% quarter-on-quarter, including new production capacity, and the utilization rate will drop to 64%-66%.

Out of optimism about the needs of automobiles, OLED driver ICs, WiFi and other fields, UMC is actively expanding its 28-nanometer process, and Nanke’s Fab 12A 22/28-nanometer new production capacity will soon be released. UMC’s capital expenditure this year will also remain unchanged at US$3 billion, of which 90% will be used for 12-inch capacity and 10% will be used for 8-inch capacity.

PSMC

Another mature support foundry, PSMC, consolidated revenue of NT$11.008 billion in the second quarter, a year-on-year decrease of 49.57% and a quarter-on-quarter decrease of 3.85%. Its main business loss of wafer foundry was NT$66 million. Thanks to support (from delays in plant construction progress, equipment payment delays, and gains from changes in the US dollar exchange rate), PSMC finally recorded a net profit of NT$617 million in the quarter, which was a rebound from the bottom of the first quarter, but still a significant decrease from the same period last year. 94.11%.

Xie Zaiju, general manager of PSMC, said that after the inventory adjustment since the second half of last year, a small number of urgent orders have been received one after another, but they are all short-term orders of replenishment nature, but there are still no signs of long-term demand recovery. PSMC’s 8-inch and 12-inch capacity utilization rates in a single quarter are roughly around 60%-62%, so the company still holds a conservative view in the second half of the year.

The scale of capital expenditure of PSMC this year is about 1.93 billion US dollars, a slight increase from last year, of which the new 12-inch copper factory accounts for about 78%, other 12-inch factories 20%, and 8-inch factories 2%. In addition, for AI opportunities, PSMC is experimenting with the use of circle stacking technology (WoW) to produce 3D AI acceleration chips. Customers are very interested in this, and it is expected to achieve certain results in 2024-2025.

Short-term adjustments do not hide long-term kinetic energy

The performance of the three major wafer foundries in the second quarter still declined significantly year-on-year, indicating that the industrial adjustment period is not over. After the two-quarter inventory adjustment cycle, the main suspense is when demand will pick up. Judging from the 8% drop in the initial stocking of the iPhone 15 this year, the situation in consumer electronics is still unclear. Correspondingly, the occupancy rate of each manufacturer’s 8-inch mature wafer process is generally maintained at only 50%, and the price pressure is getting heavier. It may be difficult for wafer foundries to maintain their usual practice of not lowering their prices.

However, in addition to consumer electronics, new fields such as AI and vehicles have brought great help to wafer foundries. Relying on the competitiveness of advanced manufacturing process and advanced packaging, TSMC has won orders from GPU manufacturers such as Nvidia. In mature nodes, 28nm is relatively advanced, and is suitable for various applications that require certain performance, such as car cores, OLED driver chips, and WiFi chips. UMC’s process also maintains a high capacity utilization rate, which shows that the The ability to headwind the industrial chain. It is worth noting that UMC did not slow down capital expenditures, but continued to expand the production capacity of this process node.