TSMC 2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022; this is an annual Form 20-F, not a standalone 2022 Q4 filing. Financial statements are prepared under IFRS as issued by the IASB. Amounts are primarily in New Taiwan dollars (NT$); U.S. dollar translations are for convenience.
Business context
TSMC is a dedicated semiconductor foundry, manufacturing chips from customer designs and providing related design, mask, packaging and testing services. Wafer fabrication generated approximately 88% of 2022 revenue. The company reported 2022 annual capacity of about 15 million 12-inch-equivalent wafers and shipped 15.253 million.
Financial and operating performance
| Metric | 2022 | Change versus 2021 |
|---|---|---|
| Net revenue | NT$2,263,891 million (US$73,670 million) | +42.6% |
| Gross profit / gross margin | NT$1,348,355 million / 59.6% | Margin up from 51.6% |
| Operating income / operating margin | NT$1,121,279 million / 49.5% | Operating income +72.5%; margin up from 40.9% |
| Net income attributable to parent shareholders | NT$992,923 million (US$32,311 million); NT$38.29 per share | +67.6%; margin rose from 37.3% to 43.9% |
| Cash from operating activities | NT$1,610,599 million | Up from NT$1,112,161 million |
| Capital expenditures | NT$1,082,672 million | Up from NT$839,196 million |
Revenue growth reflected higher average selling prices and wafer shipments, plus a weaker NT dollar against the U.S. dollar. Management attributed the gross-margin improvement mainly to value-based pricing, favorable foreign exchange and cost improvements, partly offset by lower capacity utilization. Operating expenses rose 34%, including higher R&D spending and new-fab preparation costs. R&D expense was NT$163,262 million, or 7.2% of revenue.
High-performance computing was the largest platform at 41% of revenue, up from 37%; smartphone fell to 39% from 44%. Automotive revenue grew 73% year over year, to 5% of revenue. Advanced technologies of 7-nanometer and below accounted for 53% of wafer revenue, versus 50% in 2021; 3-nanometer entered volume production in 2022.
Liquidity, debt and capital allocation
- Cash and cash equivalents were NT$1,342,814 million at year-end. Cash, cash equivalents and current marketable securities together totaled NT$1,561,486 million, compared with NT$1,188,456 million a year earlier.
- Short-term loans were nil. Aggregate long-term debt was NT$858,410 million, including NT$19,314 million classified as current. Debt consisted mainly of fixed-rate corporate bonds.
- Operating cash flow exceeded capital expenditures by approximately NT$527,927 million before other investing, financing and exchange-rate movements. Cash increased NT$277,824 million during the year.
- TSMC issued NT$65,400 million of NT-dollar corporate bonds and US$4.5 billion of U.S.-dollar corporate bonds in 2022. Management said operating cash flow, liquid investments and capital-market access should cover working capital, investment, debt service and dividends for the next 12 months.
- The Board approved quarterly 2022 cash dividends of approximately NT$2.75 per share each; the fourth-quarter dividend was scheduled for payment in July 2023.
Outlook, risks and notable items
- Investment plans: 2023 capital expenditures were expected to be US$32–36 billion, subject to market conditions, focused on advanced-node capacity, specialty technologies, advanced packaging and R&D. Management expected 5G and high-performance computing to support strong demand over the following years, while describing investment plans as preliminary.
- Expansion: Arizona Fab 21 and Japan’s JASM were targeting commercial production in 2024; TSMC also announced a second Arizona facility planned for 2026. Overseas expansion brings execution, cost, labor, supply-chain and productivity risks.
- Concentration and cyclicality: The ten largest customers represented 68% of revenue in 2022; the largest represented 23%. Demand downturns and lower utilization could pressure margins because manufacturing costs are substantially fixed.
- Geopolitical and regulatory exposure: Taiwan concentration, cross-strait tensions, trade barriers and export controls are material risks. TSMC said it obtained a one-year U.S. authorization to maintain Nanjing fab operations; future authorization is not assured. The filing reported no material effect on current results from expanded export controls as of its date.
- Other operating risks: Foreign-exchange exposure, equipment and materials availability, power and water supply, natural disasters, cyberattacks, talent needs and environmental regulation could affect production, costs or expansion. A 1% depreciation of the U.S. dollar against the NT dollar was estimated to reduce operating margin by about 0.4 percentage point based on 2022 results.
- Tax and unusual items: A five-year Taiwan tax holiday expired at the end of 2022. TSMC anticipated eligibility for new 2023 R&D and advanced-equipment tax credits, which could partly offset the expiry; the actual benefit is not quantified here. A NT$791 million impairment charge was recorded for machinery and equipment assessed to have no future use.
- Contingency: Daedalus Prime filed U.S. ITC and district-court complaints in September 2022 alleging infringement of four patents; the ITC opened an investigation in October. TSMC said the outcome was indeterminable and it could not reliably estimate a contingent liability.
- Controls and audit: Management and Deloitte concluded internal control over financial reporting was effective as of year-end. Deloitte issued unqualified opinions on the financial statements and internal controls.
Investor verification priorities
- Verify the annual results against the audited statements and distinguish annual figures from any separate quarterly release.
- Track utilization, customer orders and pricing to assess whether the 2022 margin gains are sustainable through the semiconductor cycle.
- Monitor execution, cost and expected returns for the US$32–36 billion 2023 capex plan and overseas fab timelines.
- Assess customer concentration, export-control developments affecting China operations, and Taiwan-related geopolitical exposure.
- Follow the Daedalus litigation and the actual effect of the Taiwan tax-holiday expiry and new tax incentives.