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TSMC(TSM) - 2023 Q4 - Annual Report
TSMTSMC(TSM)2024-04-18 10:27
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Currency and Market Risks - The company's revenue could be negatively affected if the U.S. dollar appreciates significantly versus other major currencies, leading to decreased demand for its products and services[62] - Net revenue in 2023 decreased by NT102,155millioncomparedto2022,primarilyduetoa27102,155 million compared to 2022, primarily due to a 27% YoY decline in orders from Asia Pacific and a 4% YoY decline from North America, partially offset by a 9% YoY increase from China[96] - North America accounted for 68% of net revenue in 2023, maintaining its position as the largest market, followed by China at 12%[96] Regulatory Compliance and Legal Risks - Non-compliance with export control, environmental, and climate-related laws could harm the company's business and operational results, potentially resulting in significant legal liability[62] - Manufacturing activities are subject to various governmental regulations, including export control, environmental, and climate-related laws, which could result in penalties, legal liabilities, and operational disruptions if not complied with[63] - Compliance with environmental and climate-related laws may require the company to implement remedial programs, modify product designs, and incur significant expenses such as carbon fees and renewable energy procurement[64] - The company is subject to antitrust laws and regulations in multiple jurisdictions, and any adverse results from potential antitrust proceedings could harm its business and operational results[67] - The company received an inquiry from the European Commission regarding alleged anti-competitive practices in semiconductor sales, which was closed in May 2020 after cooperation[68] Expansion and Operational Challenges - Failure to timely obtain necessary approvals, such as for fab land and construction, could impair the company's operational and financial results[62] - Delays in obtaining environmental approvals for new fab projects could limit or increase the cost of expansion plans, adversely affecting the company's business and operational results[65] - The company plans to expand manufacturing capacity and upgrade technologies to meet long-term market demand, focusing on 5G and high-performance computing trends[91] - Investments in 2024 will include building/facility expansions for Fab 20, Fab 21, Fab 22, and Fab 23, alongside R&D for new process technologies[92] Technology and Manufacturing Capabilities - The company produced 28% of the world's semiconductor output value (excluding memory) in 2023, down from 30% in the previous year due to an inventory correction within the semiconductor industry[84] - The company operates one 150mm wafer fab, six 200mm wafer fabs, six 300mm wafer fabs, and five advanced backend fabs globally[86] - The company's 5-nanometer technology entered volume production in 2020, and 3-nanometer technology entered volume production in 2022[88] - The company's 2-nanometer technology is on track for volume production in 2025[88] - The company's advanced technologies (7-nanometer and below) contribute significantly to its net revenue, positioning it as a technology leader among dedicated foundries[88] - Annual capacity in 2023 reached approximately 16 million 12-inch equivalent wafers, up from 15 million in 2022, driven by expansion in 3-nanometer and 5-nanometer technologies[90] - Capital expenditures for 2024 are projected to be between 28 billion and 32billion,focusingon2−nanometer,3−nanometer,and5−nanometernodes,aswellasspecialtytechnologiesandadvancedpackaging[92]LandandFacilityOwnership−Thecompany′slandleasesforitsfabsinHsinchuSciencePark,CentralTaiwanSciencePark,andSouthernTaiwanScienceParkaresettoexpirebetweenDecember2024andJune2043[86]−Thecompany′ssubsidiary,TSMCArizona,ownsapproximately4,775,885squaremetersoflandinArizonaforFab21andrelatedoffices[86]−Thecompany′ssubsidiary,JASM,ownsapproximately195,035squaremetersoflandinKumamotoPrefecture,Japan,forFab23andrelatedoffices[86]−Thecompany′ssubsidiary,ESMC,isacquiringapproximately51hectaresoflandinDresden,Germany,forFab24andrelatedfacilities[86]ShareholdingandSubsidiaries−Thecompany′sNationalDevelopmentFundoftheR.O.C.owned6.3832 billion, focusing on 2-nanometer, 3-nanometer, and 5-nanometer nodes, as well as specialty technologies and advanced packaging[92] Land and Facility Ownership - The company's land leases for its fabs in Hsinchu Science Park, Central Taiwan Science Park, and Southern Taiwan Science Park are set to expire between December 2024 and June 2043[86] - The company's subsidiary, TSMC Arizona, owns approximately 4,775,885 square meters of land in Arizona for Fab 21 and related offices[86] - The company's subsidiary, JASM, owns approximately 195,035 square meters of land in Kumamoto Prefecture, Japan, for Fab 23 and related offices[86] - The company's subsidiary, ESMC, is acquiring approximately 51 hectares of land in Dresden, Germany, for Fab 24 and related facilities[86] Shareholding and Subsidiaries - The company's National Development Fund of the R.O.C. owned 6.38% of its outstanding shares as of February 29, 2024[78] - TSMC owns approximately 28.3% equity interest in Vanguard International Semiconductor Corporation (VIS) as of February 29, 2024[139] - TSMC owns 100% equity interest in TSMC Washington, LLC, as of February 29, 2024[140] - TSMC owns approximately 38.8% equity interest in Systems on Silicon Manufacturing Company Pte. Ltd. (SSMC) as of February 29, 2024[141] - TSMC owns approximately 34.8% equity interest in Global Unichip Corporation (GUC) as of February 29, 2024[141] - TSMC owns approximately 67.4% equity interest in VisEra Technologies as of February 29, 2024[142] - TSMC owns approximately 41.0% equity interest in Xintec, Inc. as of February 29, 2024[143] - TSMC owns approximately 71.4% equity interest in Japan Advanced Semiconductor Manufacturing, Inc. (JASM) as of February 29, 2024, which will increase to 86.5% after new investments[146] Revenue Breakdown by Platform - Net revenue breakdown by platform: High Performance Computing (43%), Smartphone (38%), IoT (8%), Automotive (6%), DCE (2%), Others (3%) in 2023[109] - Smartphone net revenue decreased by NT73,965 million (8% YoY) and IoT net revenue decreased by NT34,198million(1734,198 million (17% YoY) from 2022 to 2023[109] - Automotive net revenue increased by NT17,273 million (15% YoY) from 2022 to 2023[109] R&D and Innovation - R&D expenditure in 2023 was NT182,370million(US182,370 million (US5,956 million), representing 8.5% of net revenue, with focus on 7nm, 5nm, and 3nm technologies[117] - Multi-project wafer program (CyberShuttle®) extended to all customers, reducing mask costs and accelerating time-to-market for prototyping and verification[113] - Open Innovation Platform® (OIP) initiative enhanced with EDA and IP readiness for 2nm and 3nm technologies, and 3Dblox Standard availability for 3DIC reference flows[112] Supply Chain and Raw Materials - Key raw material suppliers for silicon wafers include Formosa SUMCO, GlobalWafers, Shin-Etsu Handotai, Siltronic AG, Soitec Microelectronics, and SUMCO, supplying 96.2% of total wafer needs in 2023[124] Sustainability and Energy - TSMC used 2,590 GWh of renewable energy, renewable energy certificates, and carbon credits globally in 2023, with 1,493 GWh enabling overseas sites to be 100% powered by clean energy for the sixth consecutive year[127] - TSMC has signed power purchase agreements to purchase 3.1 GW of renewable energy, eliminating an estimated 4.7 million metric tons of carbon dioxide equivalent emissions annually[127] - TSMC's electricity tariff rate in Taiwan is estimated to increase by 25% effective April 1, 2024, compared to the 2023 rate, potentially increasing manufacturing costs[133] Product and Technology Offerings - High-performance computing (HPC) is a key growth driver, with products like AI accelerators, GPUs, and server processors leveraging 3-nanometer and 5-nanometer technologies[102] - Smartphone segment offerings include advanced logic process technologies like 3-nanometer FinFET and 4-nanometer FinFET, targeting premium and mainstream applications[103] - The company provides advanced packaging technologies such as CoWoS®, InFO, and TSMC-SoIC® to enhance chip integration and performance[102] - IoT platform includes 5nm, 6nm, 7nm, 12nm, 16nm, and 28nm technologies, with new FinFET-based 6nm (N6eTM) and 12nm (N12eTM) technologies offering energy efficiency and high performance[105] - Automotive sector introduced 3nm Auto Early (N3AE) program in 2023, supporting advanced driver-assistance systems (ADAS) and in-vehicle infotainment (IVI) with 5nm, 7nm, and 16nm FinFET technologies[106] - Digital Consumer Electronics (DCE) sector adopted 6nm, 7nm, 16FFC/12FFC, 22ULP/22ULL, and 28HPC+ technologies for 8K/4K DTV, 4K streaming STB/OTT, and DSLR devices[107] Customer Support and Interaction - Customer support is facilitated through global offices and subsidiaries, with web-based applications enabling real-time interaction for design, engineering, and logistics[97]