Taiwan Semi's Growth Accelerates As AMD Gains Steam

Summary

  • TSMC has been and continues to be the undisputed leader of cutting edge process and is continuing to grow business and gain market share.
  • AMD is one of the beneficiaries of TSMC's process edge and is likely to drive considerable growth at TSMC.
  • The article shows why AMD is likely to surpass Apple and become the top customer at TSMC.
  • This idea was discussed in more depth with members of my private investing community, Beyond The Hype. Get started today »

TSMC (NYSE:TSM) has been on a tear lately. One of the key developments that has been accelerating TSMC growth in 2020 has been its association with Advanced Micro Devices (NASDAQ:AMD). TSMC story, while temporarily driven by AMD, goes far beyond AMD and stands on its own merit. TSMC, now a de-facto process leader, has solid growth ahead with or without AMD. AMD mainly helps accelerate the growth into a high gear.

Apple (AAPL) contributed to more than 20% of TSMC revenues for the last several years. Outside of Huawei, no other customer has even breached the 10% mark in recent years. While not disclosed, AMD was likely a mid-single digit percentage customer in 2019. Based on the current growth trends, AMD is likely to surpass Apple in number of wafer starts in 2021 and become TSMC’s largest customer over time.

It is a tall order to say that AMD will grow its business at TSMC to Apple’s level in the next couple of years. Is it possible?

Let’s take a look.

The biggest driver of Apple business at TSMC is the iPhone. At about 200Mu per year, and rounded to 100mm2 per unit, this demand towers over all other chip demand from Apple. Chips for other devices, like watches, earphones, wireless devices, etc., are tiny in comparison to iPhone chips. The volumes of these chips are also significantly lower. Consequently, all non-iPhone chip demand at Apple likely rounds out to another 10% to 20% incremental business at TSMC. Let’s be generous and say that total Apple demand at TSMC is about 250M 100mm2 equivalent chips with about two thirds of volume at the leading edge node.

In 2020, Apple has begun moving its Mac CPU business from Intel (INTC) to TSMC. In addition to CPUs, Apple seems to be on track

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This article was written by

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Author of Beyond the Hype, a comprehensive emerging technology stock analysis and discussion service on Seeking Alpha Marketplace. Currently, we focus on identifying and investing in the semiconductor, renewable energy, storage, EV, autonomous vehicle, CPU, and GPU markets.

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Disclosure: I am/we are long AMD, TSM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Short NVDA
Long/Short volatility position in INTC

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