TSMC: Rise of the “Phantom Node”

TSMC’s financial results for Q4 of 2014 and for the full year were announced in January with TSMC stating it again had achieved record sales and profits. The fourth quarter saw TSMC set records for revenue, earnings per share and cash balance. TSMC made bold predictions last year about 20nm revenue by Q4 2014, and it appears it has met them (see 28nm Powers TSMC Forward, Part Deux). TSMC reported a “very small number” for 20nm Q2 revenue, followed by 9% in Q3 and 21% in Q4 of total wafer revenue and reported that 20nm was 9% of the total wafer revenue for the whole year. By historic standards this is an incredibly fast ramp as is shown in Figure 1 and Figure 2 below.

Figure 1. Percent Revenue Per Technology Ramp From Introduction

There had been a lot of talk about companies “skipping” 20nm. While that doesn’t appear to be the case from the meteoric rise in 20nm production, TSMC did say that it expects 20nm to contribute 20% of the total wafer revenue for 2015. Given that 20nm is exiting the 4th quarter with 21% of the total wafer revenue, a projection of only 20% for the following year based on the graphs in Figure 1 and Figure 2 also looks like it would be a strong variation from the historical “norm” for TSMC. The curves for 65nm, 45/40nm and 28nm all look quite similar for the first 5 quarters and peaked around Q12 or Q13 above 30%. It sounds like TSMC is not expecting 20nm to follow that same trajectory as the FinFET nodes start to roll into production.

Figure 2. Percent Revenue Per Technology Node Over Time

Mark Liu said that TSMC’s qualification schedule for the end of this year for 10nm remains the same with expected volume production in 2017.

C.C. Wei said that TSMC expects to have more than 50 product tape-outs this year in 16nm FinFET with high-volume production starting in Q3 and meaningful revenue contribution for Q4.

TSMC also mentioned that its average selling price was increasing due to a larger percentage of revenue coming from the newer nodes. In Q4, 51% of TSMC’s wafer revenue was from 28nm and 20nm wafers, and it sounds as if this trend is expected to continue with the introduction of 16nm this year.

Table 1. Percent of Revenue from Market Segments

Last year saw a jump in consumer sales, which was explained as being the result of several new gaming consoles being launched in 2013. This year saw a large jump in communications. CFO Lora Ho said the major contributing segments included baseband, application processors, image processors and display drivers. Another fast-growing application in 2014 was industrial and standard, which grew 30% year over year. The growth was mainly driven by increasing usage of power management ICs, near-field communications and audio codecs within the mobile devices.

The volume production of 16nm FinFET expected by Q3 this year should make 2015 a very exciting year for TSMC.