Thread by @_fabknowledge_

TSMC reported earnings last night and their results shocked most investors. Why? Buckle up and let's talk about one of my favorite companies in the world: TSMC.

1/ the biggest surprises were revenue guidance and capex guidance.

Let's start with revenue guidance - TSMC guided to ~16.6b-17.2b in Q1 or 6% over Q1 consensus. TSMC believes they can do "mid to high 20s" revenue growth

importantly they are reporting ACCELERATING REVENUE!

2/ on the capex side they came out with an eye popping 40-44 billion dollars in additions - or 40% at the midpoint over 2021. This was far in excess of any estimate on the street. The highest estimate was 40 billion.

This of course is good for WFE and Semicap.

3/ presentation specifics. 2021 was driven by HPC, Automotive, IoT, and of course smartphone. TSM expects strength to continue in that order. The thing I believe is going to happen is the handoff from smartphone to HPC this year

HPC will be largest segment by EOY 22 IMO.

4/ another theme is gross margin. Every quarter analysts pester management if gross margin is sustainable given investment

Gross margin was ~53% this q and mgmt is guiding to 53-55% higher than their "long term target of greater than 53%"

last quarter was "greater than 51%"

5/ I want to spent a second to note price increases. TSMC is heavily passing price right now and given they expect 7.4% sequential QoQ revenue growth, a large part of that is price and supports that gross margin point.

6/ They expect total industry growth of 9% (I think this is too low) and foundry industry growth of 20%

TSMC thinks they will grow 15-20% "for the long term" driven by increasing semiconductor content. Asked why this time won't lead to overbuilt as it had in the past: Answer

7/ Oh it looks almost all but certain that the $100 billion 3 year spending number can be thrown out the window.

They won't update outlook beyond 22, and they will continue to support customers and capture growth. $100b is too low now.

8/ they have almost zero interest of not 100% owning the fabs.

they have received some subsides, mostly related to asset reductions and lower taxes.

They have received 6.7b in prepayments in 21 and they think this number will be higher in 22. I expect this to continue as well

9/When asked how TSM can grow faster than their fabless customers the answer is price.

I also think that the obvious read-through of this statement is that fabless is about to move 22 numbers up. The largest fab in the world cannot accelerate their revenue if customers don't

10/ on the longevity of the capex intensity increases - given that the roadmap is more complex, the nodes will take longer to ramp, and the cost is higher they believe it will take "long term - several years" for the capex to normalize from ~50% to the mid 30s

11/ Summarizing themes

HPC is the leader this year

53%+ gross margins are sustainable

Long term growth is higher than the past + accelerating revenue in near term

$100 bil is too low / off table IMO (moving away)

Investing for longer duration for longer growth.

12/End

I look at this guide and say either TSM - the worlds largest fab with the most customers and broadest view of the land is either

1) insane
2) completely right about long term demand and is investing for whats to come.

I lean to the latter. It's secular folks.