Weekly News

①TSMC's Third-Quarter net profit of 80% on year to new record，but 2022 capex cut by 10% again.

Chipmaker TSMC has cut its capital expenditure for 2022 by about 10 percent to around $36 billion, the second time the company has revised down its capital expenditure target for this year, which was previously expected to be $40 billion to $44 billion, according to foreign media reports.

On Thursday, TSMC announced its third-quarter earnings report. According to the results, the company's third-quarter revenue rose 48 percent to NT$613.14 billion, while net profit surged 80 percent from a year earlier to a record high of NT$280.9 billion (US$8.81 billion), thanks mainly to strong sales of chips for data centers and electric vehicles.

In the third quarter, the high-performance computing and smartphone businesses contributed 39% and 41% of revenue respectively. At one point in TSMC's financial results for the first and second quarters of the year, the revenue contribution from high-performance computing surpassed that of the handset business.

In terms of revenue mix, the share of advanced process chips in TSMC's revenue further expanded, with TSMC's 7nm+ "advanced process" chips contributing 54% of total revenue in the quarter, with 7nm chips accounting for 26% and 5nm chips accounting for 28%, surpassing 7nm chips for the first time.

In addition, the company's operating margin improved by 9.4 percentage points to 50.6 percent in the third quarter compared to the same period a year earlier, while its gross margin was 60.4 percent.

The company expects fourth-quarter revenue to grow 29 percent to US$19.9 billion to US$20.7 billion, compared to US$15.74 billion in the same period a year earlier.

（Comment：This time TSMC will be 2022 capital expenditure is expected to be lowered to 36 billion yuan, compared with three months ago set target of $ 40 billion down 10%, one side of the net profit achieved a record increase, and the other side of the capital expenditure is expected to be lowered, which also reflects from the side of the global semiconductor demand weakness and inflation caused by the rising costs of semiconductor makers to the future demand to realize "more cautious", the impact of capacity expansion plans.）

②Volkswagen Group will invest $2.4 billion in China autonomous driving venture.

Volkswagen Group's software subsidiary CARIAD and Horizon Robotics, which plans to set up a joint venture to improve its software development and production, have entered into advanced negotiations with Horizon to set up a joint venture, according to foreign media reports. The VW Group said it plans to invest around €2.4 billion in this partnership and the deal is expected to be completed in the first half of 2023.

Over the past year, the Volkswagen Group has been trying to significantly increase its capabilities in computing and software. Most importantly, there has been a major shift in the group's leadership to better focus on software improvements. Last December, the company said it would invest 89 billion euros ($101 billion) over the next five years in future technologies such as electric vehicles and digitalization to make the company more competitive. VW hopes the joint venture will help close the software gap between it and other Chinese electric car makers, which could include market-leading Tesla.

（Comment：Volkswagen Group has been consolidating its vast operations to free up funds for developing battery and software capabilities to build the industry's largest fleet of electric vehicles. Focusing on open, scalable, and low-energy automotive computing platforms, Horizon offers not only autonomous driving, ADAS, and in-cabin solutions but also mobility-as-a-service (MaaS) solutions. The company's expertise lies in the field of artificial intelligence and its partners include Bosch, Audi, BYD, and SAIC, among others. With this partnership with Horizon, the company aims to replace Tesla as the leader in the electric vehicle industry by 2025.）

③EUV process to drive high-end demand, photoresist market to exceed USD 200 million by 2025.

As major foundries accelerate the introduction of EUV processes, research TECHNET predicts that the market for materials such as metal oxides and dry photoresists will grow significantly, with the market size expected to triple from US$50 million last year to over US$200 million in 2025.

TECHNET said that the competition for advanced semiconductor processes and the increase in the number of EUV process layers are driving the growth of the market for materials including photoresists. New EUV lithography currently includes metal oxide and dry lithography. Compared to traditional, metal oxide lithography has better light absorption and more accurate etching. And dry lithography compared to traditional lithography can significantly reduce production costs, energy consumption, and raw material requirements than in the past to 5-10 times.

"Lithographic materials are critical in semiconductor manufacturing and are an important part of the lithography process, as costs in semiconductor fabs are rising. As a result, material and process innovation in EUV, for example, will accelerate," says Lita Shon-Roy, CEO of TECHNET.

Global photolithography majors are also currently strengthening their competitiveness through cooperation and mergers and acquisitions, with leading factory Japan's JSR also starting to work with SK Hynix on development this year after acquiring US metal oxide photolithography factory Inpria last year, and industry sources point out that Samsung Electronics is currently introducing Inpria metal oxide photoresists.

The photoresist is a key material in semiconductor manufacturing, the current EUV photoresist main suppliers are Shin-Etsu Chemical, Tokyo Applied Chemistry, and JSR, and also contains Sumitomo Chemical, FUJI FILM, etc.

（Comment：Photoresist is one of the most important raw materials in the chip manufacturing process, the entire chip manufacturing process may require dozens of photolithography, photolithography process costs account for 35% of the entire chip manufacturing process, time-consuming about 40%-50% of the entire chip production chain, the total cost of photoresist materials accounted for about 5-6%.

In addition to the top five in the semiconductor photoresist market, the remaining four are Japanese companies. Among them, JSR, TOK's products can cover all varieties of semiconductor photoresists, is the absolute leader, especially in the high-end EUV market is highly monopolistic.)

④The global market revenue of top 10 semiconductor packaging and testing vendors increased to approximately US$17.5 billion in the first half of the year, up approximately 16.7% year-on-year.

According to a new report by CINNO Research, the top 10 global semiconductor packaging and testing companies increased their market revenue to approximately US$17.5 billion (approximately RMB 125.475 billion) in the first half of 2022, an increase of approximately 16.7% year-on-year.

According to the report, the top 10 finalists remain consistent with the first half of 2021. Among them, five are from Taiwan, three are from China, one is from the US, and one is from Singapore.

CINNO Research's top 10 global semiconductor packaging and testing (OSAT) companies for H1 2022 are as follows

No.1: ASE ranked first with revenue growth of approximately 27.1% year-on-year. The Automotive Electronics revenue of the packaging business grew 54% in 1H 2022 compared to last year due to strong end-use demand resulting from HPC, automotive, 5G, IoT growth, and expanding silicon content.

No. 2: Amkor's revenue grew by 13.5% year-on-year to rank second. This segment grew by 27% year-on-year due to increased demand for data centers and high-performance computing, while automotive and industrial revenue grew by 16% year-on-year. Capacity utilization in WB and Lead Frame is currently stable due to the stickiness of the customer base and the binding of long-term agreements.

No.3: JECT's revenue grew by approximately 8.5% year-on-year, placing it in third place. JECT has industry-leading advanced semiconductor packaging and testing technologies in key areas such as 5G communications, high-performance computing, consumer, automotive and industrial. The Company will further promote the production application and customer product introduction of high-density integrated SiP integration technology and 2.5D / 3D wafer-level small chip integration technology.

No.4: Powertech's revenue increased by approximately 8.9% year-on-year and ranked fourth. Powertech's revenue in the first half of the year was the highest ever for the same period. Demand for DRAM capacity was stable amidst demand from data centers, automotive electronics, and high-level computing. The NAND & SSD side will also be affected due to declining sales and inventory adjustments in the consumer electronics market, but demand from data centers will be maintained. The Company will continue to maintain its Flip Chip and advanced packaging technology in the logic chip business.

No.5: TFME's revenue grew by approximately 33.4% year-on-year to rank 5th. The significant growth in TFME's packaging revenue was attributable to the simultaneous breakthroughs achieved at all major bases, with Changchun, Nantong, Hefei, and TFME each completing the introduction and mass production of many new products and breakthroughs with key customers, while small-scale mass production of customers' 5nm products is expected in the second half of the year.

No.6: HT-Tech ranked 6th with revenue growth of approximately 6.9% year-on-year. HT-Tech now has a Chiplet packaging technology platform and has completed the development of large-size eSiFO products with chip-level and board-level reliability certification.

In addition, UTAC, KYEC, ChipMOS, and Chipbond were ranked seventh to tenth.

（Comment：CINNO Research said that in the future, as 5G communication technology, the Internet of Things, big data, artificial intelligence, visual recognition, autonomous driving, and other application scenarios continue to increase, the industry's demand for thinner, lighter, faster data transmission rates and smaller power loss chips will continue to increase, and advanced packaging, as an important means to continue Moore's Law, has become a major increment in the future global packaging market, and the market size will continue to grow.）

⑤Power transistor sales expected to reach US$24.5 billion this year, up 11%.

Power transistor sales are on pace to grow 11% in 2022 and expected to reach a sixth-straight record high level, totaling $24.5 billion this year, primarily because of the highest increase in the average selling price (ASP) for products in this large discrete semiconductor segment in more than a decade, reports IC Insights.

The IC Insights report stated that tight supplies and shortages of power transistors and other widely used semiconductors have kept ASPs high in a number of manufacturing industrial sectors—especially in automotive and industrial equipment—despite recent?slowdowns in economic growth.

The string of record-high sales for power transistors is projected to end in 2023 when revenues are forecast to drop 2% to $24.0 billion as a result of a slowdown in global economic growth next year and a 4% drop in the average selling price of devices. Figure 1 shows the power transistor market is expected to begin another growth cycle in 2024, with annual sales steadily increasing through 2026 and hitting $28.9 billion, which represents a compound annual growth rate (CAGR) of 5.5%, based on the 3Q22 Update outlook.

（Comment：Imported IGBTs are out of stock in the second half of 2019, and MOSFETs are entering a shortage cycle in early 2020 along with the new crown pneumonia outbreak. Power transistor prices have been moving up since 2021, with IC Insights noting that the average selling price (ASP) of power transistors is expected to increase by 11% in 2022 after an 8% increase in 2021. The average sales price (ASP) of power transistors is expected to increase by 11% in 2022 after an 8% increase in 2021. Moreover, power discrete, with MOSFETs, IGBTs and other power transistors as mainstream products, is subject to rapid growth in demand due to increased consumption of power components per unit in products such as 5G infrastructure, consumer fast charging, automotive electronics and electric vehicles, and the future of power devices speaks for itself.）