TSMC has, for the first time in what seems like forever, achieved higher revenues from consumer and professional chips in the High Performance Computing (HPC) market segment compared to those for smartphones. Part of that is likely due to the lack of recent smartphone chip announcements, but let’s leave that for now.
The difference was not significant, with HPC’s 41% contribution to the company’s revenue beating the smartphone segment’s 40% decline. What the 41% HPC contribution “hides” the overall picture is TSMC’s HPC revenue explosion: segment revenue jumped 26% sequentially. HPC was a major contributor to TSMC’s outstanding financial performance in the first quarter of the year, leading it to exceed guidance guidance across all relevant metrics.
TSMC’s HPC chip orders generated revenue of ~$6.8 billion in Q1 2022, up significantly from ~$4.3 billion in Q4 last year. Given the sluggish smartphone market, TSMC is betting its tokens on HPC as the main driver of its 2022 growth aspirations, primarily fueled by the explosive prominence of the AI, data center and cloud markets. supercomputing, which itself follows the explosion in consumer electronics that followed the COVID-19 pandemic.
TSMC’s state-of-the-art manufacturing processes, and in particular its advanced packaging capabilities, are proving to be the fuel of the proverbial fire for its HPC revenues. The company’s 3D SoIC (system-on-chip) packaging technology has already attracted large orders for HPC chips from customers, as conventional monolithic chip manufacturing is clearly on its way out. Chiplets seem like today’s best bet for the future, barring some very specific scenarios like Cerebra’s Wafer Scale Engine (WSE).
Hand in hand with TSMC walk the likes of AMD, whose ultra-competitive Epyc processors are made in factories of old and are used to power said factories themselves. Companies at the forefront of HPC innovations such as Cerebra WSE and Altera’s Altra Max products all use TSMC’s manufacturing capability. Intel’s manufacturing issues have arguably opened the door for both AMD – and perhaps more crucially, Arm-based chips – to enter the HPC space, where TSMC’s technological dominance is understandably required. for these high-impact market moves. TSMC’s customer success literally makes (or breaks) its own. Even Intel now ranks among TSMC’s customers for its discrete GPU offerings.
Interestingly, TSMC’s automotive revenue for the first quarter of 2022 was also up 26% from the previous quarter. It is likely that the increase in demand from the automotive market is strongly linked to the increasing requirements for modernization and chips for the rapidly growing global fleet of electric vehicles. Even so, automobile sales accounted for only 5% of the company’s revenue.
Of course, smartphones will continue to be a significant contributor to TSMC’s bottom line, and any technology transition to the next big thing will end up being (which some place at the feet of AR [Augmented Reality] devices) will not happen overnight. Orders for Apple’s iPhone and iPad products alone will contribute $17 billion to the company’s projected $68 billion in revenue for 2022. Still, the days of smartphone chip dominance could touch to their end, at least for now.