Business context and reporting period
TSMC’s Form 20-F is an audited annual report for the fiscal year ended December 31, 2023, filed April 18, 2024. It is not a standalone 2023 fourth-quarter report; the filing does not provide a clear Q4-only financial summary. TSMC operates a dedicated semiconductor foundry, manufacturing chips to customers’ designs, with wafer fabrication accounting for about 87% of FY2023 revenue. Financial statements are prepared under IFRS as issued by the IASB and reported in New Taiwan dollars (NT$); U.S. dollar figures are convenience translations.
Financial performance and liquidity
Unless noted otherwise, figures below are NT$ millions. Year-over-year changes compare FY2023 with FY2022.
| Metric | FY2022 | FY2023 | Change / context |
|---|---|---|---|
| Net revenue | 2,263,891 | 2,161,736 | Down 4.5% |
| Gross profit / gross margin | 1,348,355 / 59.6% | 1,175,111 / 54.4% | Margin down 5.2 percentage points |
| Operating income / operating margin | 1,121,279 / 49.5% | 921,466 / 42.6% | Operating income down 17.8% |
| Net income | 993,295 | 851,028 | Down 14.3% |
| Net income attributable to parent shareholders | 992,923 | 851,740 | Down 14.2%; net margin 39.4% versus 43.9% |
| Basic and diluted EPS | NT$38.29 | NT$32.85 | Equivalent ADS EPS: US$5.36 for FY2023 |
| Operating cash flow | 1,610,599 | 1,241,967 | Down 22.9% |
| Capital expenditures | 1,082,672 | 949,817 | Down 12.3%; funded by operating cash flow and bond proceeds |
Lower wafer shipments were the main revenue headwind: shipments fell to approximately 12.0 million 12-inch-equivalent wafers from 15.3 million. Higher average selling prices from advanced-node mix and NT-dollar depreciation partly offset the decline. Gross margin was pressured by lower capacity utilization and the 3-nanometer production ramp. Operating expenses rose 12.0%, including increased R&D and overseas-fab preparation costs. Higher interest income helped lift non-operating income; lower income-tax expense partly reflected an adjustment to prior-year surtax on unappropriated earnings.
Liquidity and debt: Cash and cash equivalents at year-end were NT$1,465,428; cash, cash equivalents and current marketable securities together were NT$1,687,644, up from NT$1,561,486 in 2022. Current assets were NT$2,194,033 and current liabilities NT$942,805. Operating cash flow was the primary liquidity source. Long-term debt was NT$927,576, including NT$9,293 classified as current; bank loans under hedging financial liabilities were NT$27,290. Total liabilities were NT$2,078,330. Management stated that available liquidity and capital-market access should cover working capital, capital expenditures, debt repayments, dividends and other needs for the next 12 months.
Contractual cash obligations totaled NT$2,604,268, including NT$1,121,148 of capital-purchase and other purchase commitments, NT$1,142,688 of long-term debt payments including interest, and NT$278,295 of customer temporary receipts. The filing reports investment-grade ratings of AA- from S&P and Aa3 from Moody’s.
Material changes and business mix
- Advanced technologies of 7 nanometers and below rose to 58% of wafer revenue from 53% in 2022. The 3-nanometer node contributed 6% of wafer revenue, while 5-nanometer contributed 33%.
- By platform, high-performance computing increased to 43% of revenue and automotive to 6%; smartphone declined to 38%, IoT to 8%, and digital consumer electronics to 2%.
- By customer-headquarters geography, North America remained 68% of revenue, China increased to 12% from 11%, and Asia Pacific excluding China and Japan fell to 8% from 11%.
- Annual production capacity increased to approximately 16 million 12-inch-equivalent wafers from 15 million, primarily through 3-nanometer and 5-nanometer expansion.
- R&D spending rose 11.7% to NT$182,370, or 8.5% of revenue, supporting 2-nanometer, 3-nanometer and 14-angstrom development.
Outlook, risks and unusual items
- Management expects 2024 capital expenditures of US$28–32 billion, subject to market conditions, focused on 2-, 3- and 5-nanometer capacity, specialty processes, advanced packaging and R&D. Management cited 5G and high-performance computing as expected multi-year demand drivers; 2-nanometer volume production is expected in 2025.
- Key risks include semiconductor cyclicality and overcapacity, customer concentration (the largest customer represented 25% of 2023 revenue; the top ten represented about 70%), technology execution and competition, overseas expansion costs and delays, equipment and material supply constraints, and power and water availability.
- Geopolitical and trade restrictions are significant uncertainties. TSMC said its Nanjing fab’s U.S. general authorization was extended through May 31, 2024, while a permanent Validated End-User authorization was being sought; approval was not assured.
- Foreign exchange is material: substantially all sales are denominated in U.S. dollars. Management estimated that each 1% depreciation of the U.S. dollar against the NT dollar would reduce operating margin by approximately 0.4 percentage points based on 2023 results.
- Taiwan electricity tariffs effective April 1, 2024 were estimated to be 25% higher than 2023 rates. Taiwan’s carbon-fee system is expected to begin collection in 2025, but the rate was undetermined in the filing.
- A Taiwan earthquake on April 3, 2024 caused mainly inventory and equipment damage. TSMC preliminarily estimated losses of about NT$3 billion net of insurance, to be recognized in Q2 2024.
- Daedalus Prime patent litigation was settled and dismissed in 2023. TSMC reported no other material litigation as of year-end. Deloitte issued unqualified opinions on the financial statements and internal controls.
Most important facts for investors to verify
- Whether wafer shipments and utilization recover enough to restore gross margin after the 2023 decline.
- Whether the US$28–32 billion 2024 capex plan, overseas-fab buildout and 2-nanometer timetable remain on schedule and within budget.
- How customer concentration, end-market demand and U.S.–China export controls affect orders, supply access and the Nanjing authorization.
- The realized impact of higher Taiwan electricity tariffs, carbon fees, foreign-exchange movements and overseas operating costs.
- The final earthquake loss and insurance recovery, plus the timing and terms of customer temporary-receipt settlements and large purchase commitments.