TSMC raised its 2020 chip capacity bet mid-pandemic and rode 5G and HPC demand to records

In July 2020, in the middle of the pandemic, TSMC reported record quarterly results and did something most manufacturers were avoiding: it raised capital spending. The company lifted its 2020 capex plan to US$16-17 billion from $15-16 billion, after spending $14.9 billion in 2019.

The bet was on 5G smartphones and high-performance computing. TSMC's CFO said continued 5G infrastructure deployment and HPC launches were offsetting weakness elsewhere, and management raised 2020 revenue growth guidance to more than 20% from mid-to-high teens.

Second-quarter net profit had already surged 81% year over year to a record T$120.8 billion (US$4.1 billion), with revenue up 34.1% to $10.4 billion, and TSMC guided third-quarter revenue up as much as 22%.

Q2 2020 net income rose 81% to a record; TSMC raised 2020 revenue growth guidance above 20% and lifted capex to $16-17B from $15-16B.

TSMC saw 5G and HPC demand strengthening even as other markets fell.

Raising capex mid-pandemic protected its 5nm and 7nm lead.

Record profits gave it the cash to outspend rivals in a downturn.

Losing Huawei as a customer did not change the demand outlook.

When demand is shifting toward your technology, spend through the uncertainty: TSMC's mid-pandemic capex increase locked in the 5nm and HPC lead rivals couldn't match.

The pandemic capex bet paid off as 5G and HPC demand surged through 2020-21; TSMC followed with even larger spending in 2021 and cemented its position as the world's indispensable chip foundry.