TSMC founder Morris Chang recently published his autobiography, and chairman Xie Jinhe posted on Facebook on the 4th, pointing out that he was deeply impressed by Morris Chang's account of the fundraising for TSMC in 1986 with Formosa Plastics Group founder Wang Yongqing. Wang Yongqing was once the third largest shareholder of TSMC, and if Formosa Plastics had held on to TSMC and not sold a single share, Formosa Plastics' TSMC holdings would be worth 1.4 trillion NTD.
Wang Yongqing sold 5% of TSMC shares in the third year of investment
Xie Jinhe pointed out that when TSMC was being established, at that time everyone could not understand semiconductors, and Morris Chang invited the business community to invest, but many declined. The attitude of Formosa Plastics was a key turning point. To secure Wang Yongqing's investment, Morris Chang, Stan Shih, and Hu Ding-hua were invited to the Formosa Plastics building, where Wang Yongqing hosted them and served Formosa Plastics steaks.
Xie Jinhe mentioned that Morris Chang said the entire evening was filled with laughter and chatter, with Wang Yongqing frequently asking Morris Chang if the steak was delicious, but they did not discuss semiconductors. The conclusion was that Formosa Plastics would not invest, which posed a big problem. The Minister of Economic Affairs, Lee Da-hai, pleaded with Premier Yu Kuo-hwa to intervene, and finally persuaded Wang Yongqing to invest. Formosa Plastics became an original shareholder of TSMC, investing $7.25 million, accounting for 5% of the total capital of $145 million (about 5.5 billion NTD).
Among the original shareholders, the first to sell all of their TSMC shares was Wang Yongqing. Wang Yongqing invested in TSMC and appointed Wang Wen-yong as a director. In the third year, he instructed Wang Wen-yong to sell all the shares, at an average price of 17.6 NTD. If Formosa Plastics had held on to TSMC and not sold a single share, their TSMC holdings would be worth 1.4 trillion NTD.
Xie Jinhe sighed that last year, the stock prices of Formosa Plastics' "four treasures" were cut in half, and the total market value of the four treasures, plus Nan Ya Plastics, Nan Ya PCB, and Taisel, was only 1.14 trillion NTD. The 5% of TSMC that Wang Yongqing invested in, if still held, would be worth more than the entire Formosa Plastics group, which is an unimaginably huge change, and can only be described as "if only I had known earlier".
TSMC's advanced process pricing is rising
According to Tempo reports, TSMC's Arizona fab will start mass production in early 2023, with a monthly capacity of 20,000-30,000 wafers. The semiconductor industry has heard that due to higher manufacturing costs in the US compared to Taiwan by 30%, as well as the strong demand for AI chips, TSMC will raise the prices of its advanced process wafer foundry services by 5-10%. Semiconductor industry analysts believe that TSMC's advanced process prices will rise by about 3-4%, with AI chip product manufacturing prices rising 8-10%.
IDC senior research manager Zeng Guanwei analyzed that Apple, Nvidia, and Qualcomm are all placing continuous orders with TSMC for 3nm. To cope with full capacity utilization, if customers want to increase orders, they must be processed as super rush orders. Combined with overseas capacity expansion and rising electricity prices, production costs have risen sharply, so TSMC will raise the foundry prices for 3/4/5nm process products, starting from products shipped in the first quarter of this year.
The foundry price for AI chip-related products is expected to rise 8-10%, while the increase for mobile chip is in the low single digits (1-3%). Overall, TSMC's advanced process foundry price increase is about 3-4%. Zeng Guanwei directly stated that IC design companies can accept this price hike to consolidate their voice in the AI ecosystem, as it is a reasonable cost pass-through action.
Is TSMC's 2 nanometer being outsourced?
Additionally, TSMC plans to start mass production of 2nm advanced process chips in the second half of this year, with Apple, Nvidia, and Qualcomm expected to be the main customers. However, a Korean media report indicates that TSMC's 2nm process capacity is limited, and major customers may shift orders to Samsung to diversify the supply chain.
The report states that Japan's Rapidus, South Korea's Samsung, and TSMC are all actively trying to mass produce semiconductor chips using the 2nm process. TSMC's yield rate can reach 60%, and it is currently conducting process testing with its customers, but TSMC's current capacity is quite limited. The monthly production volume needs to be increased from the current 10,000 wafers to 80,000 wafers, which may not be achievable until 2026 at the earliest.
Given the high prices and low quantities, Nvidia and Qualcomm are reportedly considering using Samsung's 2nm process for testing. However, Samsung's advanced process performance has not been ideal, as it previously encountered overheating and performance bottleneck issues when producing 4nm chips for Qualcomm. This time may be Samsung's last chance to succeed.
TSMC's earnings conference call to be held
At the same time, TSMC plans to hold a physical earnings conference call on January 16. Bloomberg analysts estimate that TSMC's fourth-quarter revenue last year will exceed the market's expected NT$852.3 billion, mainly driven by demand for AI and smartphone chips, and the gross profit margin will rise to a two-year high of 58.2%. The four main highlights of the earnings conference call include:
- CoWoS advanced packaging technology: production capacity is expected to double by 2025, reflecting the expected future demand for AI chips
- Progress in production expansion at the Arizona plant: to meet the demand of American customers, while addressing the cost pressure of production in the US and Taiwan
- Challenges in mature processes: the impact of weakening demand on profits
- 2025 capital expenditure plan: capital expenditure is expected to grow 17% to $35.2 billion, reflecting confidence in the prospects of the 2-nanometer process
