Intel Corp’s earnings conference call on Thursday is expected to clarify the US semiconductor giant’s outsourcing production plans, which would be crucial regarding Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) performance, analysts said.
“TSMC stands to benefit if Intel outsources more of its fabrication to foundries,” SinoPac Securities Investment Service Corp (永豐投顧) analysts said in a note on Friday.
Yuanta Securities Investment Consulting Co (元大投顧) was more cautious, saying that Intel’s contribution initially would be limited, but its outsourcing plans would still highlight TSMC’s leadership in technology, it added.
“Intel will continue to manufacture server or high-end central processing units [CPUs], which have higher margins and contain more key technology,” Yuanta analysts said in a separate note on Friday.
However, Intel would outsource lower-end CPUs or discrete graphics processing units (GPUs) to foundries, they said.
“TSMC is expected to start receiving Intel orders in 2022, with 4 to 5 percent sales contribution initially,” Yuanta analysts said. “Although the volume may not be comparable to handset application processor ... orders, winning Intel orders highlights TSMC’s leading industry position.”
At its earnings conference on Thursday last week, TSMC announced that it would substantially raise its proposed capital expenditure to US$25 billion to US$28 billion this year, grabbing the attention of market watchers.
The announcement came amid a surge in demand for semiconductors, and ahead of Intel’s anticipated outsourcing news.
TSMC said that it would allocate most of its spending on advanced process technologies, including 3, 5 and 7-nanometer technologies — because of the multiyear trend of 5G and high-performance computing-related applications — and support its customer’s capacity needs.
Analysts said that TSMC’s capital expenditure budget for this year is far above the record-high US$17.2 billion in spending allocated last year, and also significantly higher than market predictions of US$20 billion to US$22 billion.
“TSMC’s technology leadership and ability to finance huge capital expenditure budgets underpin its leadership in advanced processes,” SinoPac analysts said.
Capital Investment Management Corp (群益投顧) said the higher capital spending indicated that TSMC would likely embrace additional orders related to advanced process technologies from some clients.
"MediaTek Inc (聯發科) may adopt TSMC’s 5-nanometer process in its flagship application processor (AP) in 2021, and Apple Inc may continue adopting TSMC’s 5-nanometer process in 2021. Additionally, Qualcomm Inc might transfer orders of its 5-nanometer process AP in late 2021 from Samsung to TSMC ... while Intel might also adopt TSMC’s 5-nanometer process in its new CPU product in the second half of 2021," Capital said in a note on Friday.
"As Advanced Micro Devices Inc has developed Zen 4 architecture products made via 5-nanometer process, Intel may face increasing pressure amid stagnant process development," it said.
TSMC’s massive spending plans could also help alleviate some industry concerns about a shortage of semiconductors, as GPUs, automotive semiconductors and APs have been in short supply recently, analysts said.
An increase in PC gaming due to people staying at home more during the COVID-19 pandemic and in demand for cryptocurrency mining have aggravated the shortage of GPU products.
Last week, chip designer Nvidia Corp said that GPU supply is very tight, and the situation is likely to persist until April, foreign media have reported.
Meanwhile, auto demand recovered in the second half of last year, but a lack of capacity has made it impossible for foundry firms to rapidly ramp up production of automotive semiconductors, NH Investment & Securities Co said, adding that the problem might remain unresolved through the first half of this year.
“A long-term boom in the foundry industry looks to be kicking off. Intel’s announcement of outsourcing production, scheduled for end-January, is also positive for the foundry industry,” the Seoul-based brokerage said in a note on Friday.
Tesla Inc temporarily halted some production at its auto assembly plant in California because of problems with its supply chain, but work has begun to resume, CEO Elon Musk told employees in an e-mail on Thursday. “We are experiencing some parts supply issues, so took the opportunity to bring Fremont production down for a few days to do equipment upgrades and maintenance,” Musk said in an all-staff message seen by Bloomberg. The factory was “back up and running as of yesterday,” and would rapidly ramp up to full production of Model 3 and Model Y cars “over the next several days,”
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