This week’s investment theme: TSMC’s 2021q4 revenue and net profit continue to reach a record high in the single quarter. At the same time, it is expected to continue to grow month on month in 2022q1, and increase its capital expenditure in 2022 to $40-44 billion, indicating that the high outlook of the upstream and downstream of the industrial chain will continue in 2022, giving the industry a “recommendation” rating.
TSMC’s 2021q4 performance continued to grow rapidly, and the 2022q1 performance guidelines continued to reach a new high. TSMC 2021q4, the global foundry leader, achieved an operating revenue of US $15.736 billion (a year-on-year increase of 24.14% and a month on month increase of 5.77%), exceeded the upper limit of the performance guidance range (US $15.4-15.7 billion), and achieved a net profit of US $5.975 billion (a year-on-year increase of 19.36% and a month on month increase of 6.43%). The company’s 2021q4 revenue growth mainly comes from the strong demand for 5nm. According to the process splitting, the revenue of advanced processes (16nm and below) accounted for 63%, with a slight decrease of 2ptcs month on month, of which the revenue of 7Nm decreased from 34% of 2021q3 to 27%, while the revenue of 5nm increased from 18% of 2021q3 to 23%, and continued to rise to a record high. From the perspective of platform applications, smart phones, HPC, Internet of things, automobiles and DCE all performed well, increasing by 7% / 3% / 3% / 10% / 2% month on month respectively, accounting for 44% / 37% / 9% / 4% / 3% of revenue respectively. Smart phones and HPC continued to contribute more than 80% of revenue; In terms of operation, the company’s inventory turnover days at the end of the reporting period was 88 days, an increase of 3 days month on month, mainly due to the early production of 5nm wafers. The company’s inventory accounted for 44% of revenue, which was in the historical median range, indicating that the downstream demand was still strong. In terms of profitability, the gross profit margin of 2021q4 company was 52.7%, an increase of 1.4pcts month on month, the net profit margin was 37.9%, and an increase of 0.2pcts month on month, The main reason is the continuous improvement of the cost side and the continuous increase of the proportion of 5nm revenue. In addition, considering the accelerating trend of global transformation to digital economy, the demand for downstream HPC, Internet of things and automobile will continue to be strong. The company expects that the revenue in 2022q1 will continue to reach $16.6-17.2 billion, and the guidance range of gross profit margin is 53% – 55%.
The capital expenditure in 2022 will be raised to US $40-44 billion, and the core enterprises in China’s industrial chain are expected to continue to benefit. In terms of capital expenditure, the company’s capital expenditure in 2021q4 reached US $8.46 billion (a year-on-year increase of 170.11% and a month on month increase of 24.96%), and the annual capital expenditure reached US $30.04 billion (a year-on-year increase of 74.25%). According to the information of the French conference, the company expects the global wafer foundry industry to continue to grow by 20% year-on-year in 2022, and the global semiconductor market (excluding storage) to grow by about 9% in 2022. TSMC’s growth rate will be higher than that of the whole industry (20%), ranging from 25% to 29%. Therefore, the company will increase its capital expenditure budget in 2022 to $40-44 billion, of which about 70% ~ 80% will be used in high-end processes, including 2nm, 3nm, 5nm and 7Nm; In terms of advanced process node R & D, 3nm will continue to use FinFET transistor architecture. According to the plan, a complete platform has been developed to support HPC and smartphone applications. It is expected to be mass produced in the second half of 2022. In addition, the n4p process, as an upgraded version of 5nm, is expected to be mass produced in the second half of 2022. Compared with N5, the efficiency of n4p is improved by 11%, the power consumption is reduced by 22% and the density is increased by 6%. TSMC, as the wind vane of the global semiconductor industry boom trend, the increase in capital expenditure indicates that the industry trend is optimistic and deterministic in 2022. With the help of domestic substitution of semiconductors, core enterprises in China’s industrial chain are expected to continue to benefit.
Key recommended targets: in terms of semiconductors, we mainly recommend: (1) automotive semiconductors (including power semiconductors). The trend of “three modernizations” of automobiles is obvious, and the shortage of chips accelerates the localization process. Key companies: Starpower Semiconductor Ltd(603290) , Ingenic Semiconductor Co.Ltd(300223) , Will Semiconductor Co.Ltd.Shanghai(603501) , China Resources Microelectronics Limited(688396) , Jiangsu Jiejie Microelectronics Co.Ltd(300623) , Wuxi Nce Power Co.Ltd(605111) etc; (2) Semiconductor equipment and materials, the core equipment and materials upstream of the semiconductor industry chain are the basis for capacity expansion. At the same time, the industry barriers are high, the pattern is good, and the certainty of performance growth is high. Key companies: Beijing Huafeng Test & Control Technology Co.Ltd(688200) , Jiangsu Yoke Technology Co.Ltd(002409) , Naura Technology Group Co.Ltd(002371) , Advanced Micro-Fabrication Equipment Inc.China(688012) ; (3) Wafer foundry or IDM, the production capacity is king under the background of shortage, and key companies: Semiconductor Manufacturing International Corporation(688981) , Huahong semiconductor, etc; (4) Large IC design companies with core competitiveness can obtain more production capacity and increase market share. Key companies: Maxscend Microelectronics Company Limited(300782) , Will Semiconductor Co.Ltd.Shanghai(603501) , Ingenic Semiconductor Co.Ltd(300223) , Sg Micro Corp(300661) , 3Peak Incorporated(688536) , and benefit targets: Shanghai Bright Power Semiconductor Co.Ltd(688368) ; In other aspects, in the field of consumer electronics, we mainly recommend terminal brands with good growth, mainly: Shenzhen Transsion Holdings Co.Ltd(688036) ; In terms of panel, with the gradual easing of the relationship between supply and demand, the decline of TV panel price has converged significantly since December 2021, and the bottom of panel price is obvious. We judge that China’s leading panel enterprises will lead the sustainable growth of the industry, and highlight: Boe Technology Group Co.Ltd(000725) and Tcl Technology Group Corporation(000100) .
Risk tips: (1) the deterioration of the epidemic situation leads to the weakening of terminal demand, which affects the semiconductor demand less than expected; (2) The capacity expansion progress of China’s major wafer plants is less than expected; (3) The research and development progress of key semiconductor technologies is less than expected; (4) The deterioration of Sino US relations and the risk of interruption of supply of key equipment, components and raw materials; (5) The performance of key recommended enterprises is less than expected
