TSMC delivered strong quarterly results and positive outlook supported by the continued ramp of 5G. CEO C.C. Wei provided one of the best summaries of 5G opportunities we’ve ever seen. 

TSMC reported their Q419 earning earlier this week, delivered very solid results and positive outlook for Q120 and 2020. The company expects 2020 revenue to grow in the 20% range, compared to the average growth rate of ~7% over the past 5 years.

The advanced 7nm process technology contributed 35% of revenue in the fourth quarter, and the company expects 7nm and 5nm to contribute more than 40% of total revenue in 2020.

The biggest drivers are the ramp of 5G, and HPC (high-performance computing) as we highlighted in our TSMC deep dive (please reach out if you want a copy). TSMC is expecting smartphones and HPC to grow 20%+ in 2020, driving their long term growth rate toward the high end of their target. To meet the increasing demand, the company spent $14.9 billion to build capacity in 2019, ~50% higher compared to a year ago and is planning to spend another $15-16 billion in 2020.

CEO C.C. Wei shared his view of the impact of 5G very clearly on the earnings call, and we couldn’t think of any better way to explain it. So here you go:

• “We expect the ramp of 5G-related and HPC applications to drive strong demand for our advanced technologies in the next several years.

• With 5G driving exponential growth in the amount of big data being generated and continuous improvement in algorithms, a smarter and more intelligent world will require a massive increase in computation power. Thus, HPC becomes another major long-term growth driver for TSMC. CPU, networking and AI accelerator will be the main growth area for our HPC platform.

• In addition, the significant performance, bandwidth and latency improvement of the 5G network will drive AI application and unlock new usage cases such as real-time response and control across many different types of connected end devices. We believe 5G is a multiyear megatrend that will create a world where digital computation is increasingly ubiquitous, which will fuel the growth of all 4 of our platforms (Smartphone, HPC, IoT, and Automotive) in the next several years” – C.C. Wei, CEO of TSMC