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Recently, TSMC officially released the company's annual report for 2022.

In the "Letter to Shareholders," Chairman Mark Liu and President C.C. Wei first pointed out that 2022 was a milestone year for TSMC. Due to technological leadership and differentiation, TSMC's revenue has set a historical high for the 13th consecutive year, and profits have grown strongly. TSMC's revenue for 2022 increased by 33.5% in US dollars, and earnings per share rose to NT$39.20, nearly three times the level of three years ago.

Specifically, TSMC's consolidated revenue for the whole of 2022 was NT$2.2639 trillion, an increase of 42.6% from the previous year's NT$1.58742 trillion; net profit after taxes was NT$1.1653 trillion, with earnings per share at NT$39.20, an increase of 70.4% from the previous year's net profit after taxes of NT$596.54 billion and earnings per share of NT$23.01.

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In US dollar terms, TSMC's consolidated revenue for the whole of 2022 was $75.8 billion, and net profit after taxes was $34.07 billion, an increase of 33.5% from the previous year's consolidated revenue of $56.82 billion, and an increase of 59.6% from the previous year's net profit after taxes of $21.35 billion.

According to them, TSMC's main achievements in 2022 include:

1. Wafer shipments reached 15.3 million 12-inch equivalent wafers, compared to 14.2 million 12-inch equivalent wafers in 2021.

2. Sales of advanced process technology (7-nanometer and below advanced processes) accounted for 53% of total wafer sales, up from 50% in 2021.

3. Provided 288 different process technologies, producing 12,698 different products for 532 customers.

4. TSMC accounted for 30% of the global semiconductor (excluding memory) output value, compared to 26% in 2021.

Looking forward to 2023, TSMC said that the company expects this year's wafer sales volume, calculated in terms of 12-inch wafers, to be between 14 million and 15 million pieces.In this financial report, TSMC also disclosed a lot of information about the company's current technology status and future R&D plans. Now, we excerpt the following, hoping to help everyone understand this world-renowned semiconductor foundry giant.

Five Major Technology Platforms

TSMC firmly believes that differentiated competitive advantages will enable TSMC to better seize future growth opportunities in the field of integrated circuit manufacturing services. In response to the five major markets of smartphones, high-performance computing, the Internet of Things (IoT), automotive electronics, and consumer electronics, and to meet customer needs shifting from process technology-centered to product application-centered, TSMC has constructed five corresponding technology platforms respectively, providing customers with complete and competitive logic process technologies, special process technologies, silicon intellectual property, and packaging and testing technologies to help customers shorten chip design time and accelerate product launch speed.

These five technology platforms are as follows:

1. High-Performance Computing

Driven by massive data computation and application innovation, high-performance computing has become one of the main drivers of TSMC's business growth. TSMC provides leading-edge technologies for fabless design companies and system companies, such as N3, N4, N5, N6, N7, and 12/16-nanometer FinFET logic process technologies, as well as a complete set of silicon intellectual property including high-speed interconnect technology, to meet customers' needs for transmitting and processing large amounts of data anytime and anywhere. In particular, TSMC has introduced the first process technology tailored for high-performance computing products - N4X, which demonstrates ultimate performance and the highest operating clock speed in TSMC's 5-nanometer process technology series. Based on advanced process technology, a variety of high-performance computing products have been introduced to the market, such as central processing units (CPUs), graphics processing units (GPUs), field programmable gate arrays (FPGAs), server processors, accelerators, and high-speed network chips. These products can be applied to current and future 5G/6G communication infrastructure, artificial intelligence (AI), cloud, and enterprise data centers. TSMC also provides a variety of advanced TSMC 3DFabric packaging and silicon stacking technologies, including CoWoS®, InFO, and TSMC-SoIC®, to assist in the integration of heterogeneous and homogeneous chips, achieving customers' demands for high performance, high computational density, high energy efficiency, low latency, and high integration. TSMC will continue to optimize the high-performance computing platform and strengthen collaborative cooperation with customers to help them seize market growth in the field of high-performance computing.

2. Smartphones

For customer applications in top-tier products, TSMC provides leading 3-nanometer FinFET (N3), 4-nanometer FinFET (N4), and 5-nanometer FinFET (N5) logic process technologies, as well as complete silicon intellectual property, to further enhance chip performance, reduce power consumption, and chip size. For customer applications in mainstream products, a wide variety of logic process technologies are provided, including 6-nanometer FinFET (N6), 7-nanometer FinFET Plus (N7+), 7-nanometer FinFET (N7), 12-nanometer FinFET Compact Plus (12FFC+), 12-nanometer FinFET Compact (12FFC), 16-nanometer FinFET Compact Plus (16FFC+), 16-nanometer FinFET Compact (16FFC), 28-nanometer High Performance Compact (28HPC), 28-nanometer High Performance Compact Plus (28HPC+), and 22-nanometer Ultra-Low Power (22ULP), as well as complete silicon intellectual property, to meet customers' needs for high-performance, low-power chip products. In addition, regardless of top-tier and mainstream product applications, TSMC also provides customers with industry-leading and highly competitive special process technologies to produce special process chips with logic application processors, including RF, embedded flash memory, emerging memory, power management, sensors, display chips, and other special process technologies, as well as various advanced TSMC 3DFabric packaging technologies leading the industry, such as integrated fan-out (InFO) technology.

3. Internet of ThingsTSMC provides a leading, comprehensive, and highly integrated Ultra-Low Power (ULP) technology platform to achieve product innovation in the Artificial Intelligence of Things (AIoT). TSMC offers industry-leading technologies, including the new generation 12-nanometer technology - N12e™ technology, which uses the FinFET architecture and offers energy efficiency and high performance, providing more computing power and AI inferencing capabilities. Additionally, TSMC provides 22-nanometer Ultra-Low Leakage (ULL) technology, 28-nanometer ULP technology, 40-nanometer ULP technology, and 55-nanometer ULP technology, which have been widely adopted by various terminal intelligent system-on-a-chip (Edge AI SoC) and battery-powered applications. TSMC further expands its Low Operating Voltage (Low Vdd) technology and provides a wider operating voltage range of electronic circuit simulation models to meet the needs of extreme-low power product applications. At the same time, TSMC also provides customers with competitive and comprehensive RF, enhanced analog components, embedded flash memory, emerging memory, sensors, and display chips, power management chips, and other special process technologies, as well as various advanced TSMC 3DFabric™ packaging technologies, including integrated fan-out (InFO) technology, to support the rapid growth of edge computing and wireless connectivity in the smart IoT.

Automotive Electronics: TSMC provides comprehensive technology and services to meet the three major application trends in the automotive electronics industry: safer, smarter, and more environmentally friendly. At the same time, it is also one of the leading companies in the industry to launch a solid automotive silicon intellectual property ecosystem, providing 5-nanometer, 7-nanometer, and 16-nanometer FinFET technologies to meet the automotive industry's needs for Advanced Driver-Assistance Systems (ADAS), In-Vehicle Infotainment (IVI), and regional controllers for new types of electronic/electrical (E/E) architecture. In addition to the advanced logic technology platform, TSMC also provides a wide range of competitive special process technologies, including 28-nanometer embedded flash memory, 28-nanometer, 22-nanometer, and 16-nanometer millimeter wave RF, high-sensitivity complementary metal-oxide-semiconductor image sensors (CIS) / Light Detection and Ranging (LiDAR) sensors, and power management chip technologies. In the emerging field of magnetic random access memory (MRAM), the 22-nanometer technology has been verified to meet the automotive Grade-1 standard, and the 16-nanometer technology is also under development to meet the requirements of the automotive Grade-1 standard. These technologies all comply with TSMC's automotive-grade process specifications based on the Automotive Electronic Council (AEC) AEC-Q100 standard or customer technical specifications.

4. Consumer Electronics

TSMC provides customers with leading and comprehensive technologies to launch AI smart components for consumer electronics, including Digital TV (DTV), Set-top Box (STB), AI-embedded Smart Camera, and related Wireless Local Area Network (WLAN), Power Management IC (PMIC), and Timing Controller (T-CON). TSMC's industry-leading 7-nanometer FinFET (7nm FinFET, N7), 16FFC/12FFC, 22ULP/ULL, and 28HPC+ technologies have been widely adopted by leading global manufacturers of 8K/4K digital TVs, 4K streaming set-top boxes/over-the-top services, and digital single-lens reflex (DSLR) cameras. For customers' digital-intensive chip designs, TSMC will continue to reduce chip size, introduce more cost-effective technologies, and launch lower power consumption technologies to facilitate the adoption of more cost-effective packaging.

TSMC emphasizes that the company will continue to strengthen its core competitiveness, properly plan the company's long-term and short-term technology and business development strategies, and assist customers in dealing with the challenges of short product cycles and fierce market competition, in order to achieve investment returns and growth goals.

Multiple Manufacturing Technologies

As one of the founders and leaders of professional integrated circuit manufacturing services, TSMC provides a comprehensive integrated circuit manufacturing service, including leading advanced process technology, special process technology, advanced mask technology, TSMC 3DFabric advanced packaging and silicon stacking technology, excellent mass production capacity and quality, and a complete design ecosystem support to meet customers' increasingly diverse needs. TSMC is committed to providing customers with unparalleled overall value, considering customers' success as TSMC's success, thus winning the trust of customers worldwide, and the company has also achieved great growth and success. The process technologies developed or provided by TSMC in 2022 include:

1. Logic Process Technology

The development of 2-nanometer (N2) technology is progressing according to plan and is making good progress. N2 technology uses TSMC's first-generation nanosheet transistor technology, providing full process node performance and power consumption improvements, and is expected to start mass production in 2025.

3-nanometer Fin Field-Effect Transistor (FinFET) (N3) technology has been mass-produced according to plan in the second half of 2022.The N3 Enhanced (N3E) technology is an enhanced version of the N3 technology, which will continue to provide industry-leading advantages for mobile communication and high-performance computing applications, and is expected to start mass production in the second half of 2023.

The 4-nanometer FinFET (N4) technology is an enhanced version of the 5-nanometer FinFET (N5) technology, which has started mass production in 2022.

The development of the 4-nanometer FinFET Plus (4nm FinFET Plus, N4P) technology is on schedule and progressing well. It has received customer product tape-outs in 2022 and is expected to start mass production in 2023.

The N4X process technology was introduced in 2021. This technology is TSMC's first custom-made for high-performance computing products, showing the ultimate performance and the highest operating clock in TSMC's 5-nanometer series process technology, and is expected to receive customer product tape-outs in 2023.

The 5-nanometer FinFET Plus (N5P) technology is an enhanced performance version of the N5 technology. It entered the second year of mass production in 2022 and is applied to customer mobile phones and high-performance computing products.

The 6-nanometer FinFET (N6) technology entered the third year of mass production in 2022 and is widely used in customer mobile phones, high-performance computing, and consumer electronics products.

The 7-nanometer FinFET (N7) and 7-nanometer FinFET Plus (N7+) technologies have been mass-produced for customers' 5G and high-performance computing products for many years, and in 2022, they entered the second year of mass production for consumer electronics and automotive products.

The N12eTM technology, based on the 12-nanometer FinFET Compact Plus (12nm FinFET Compact Plus, 12FFC+), started mass production in 2021. Subsequently, in 2022, innovative low-leakage input/output (Input/Output, IO) components were introduced, and a pilot production is planned for 2023.

The 22-nanometer Ultra-Low Leakage (ULL) (22ULL) technology introduced a new enhanced version of low-leakage components in 2021 and began to be applied to IoT products in 2022.

II. Special Process TechnologyThe 5-nanometer FinFET automotive (N5A) technology is a 5-nanometer technology that has been verified for automotive use and provides an Automotive Design Development Platform. The N5A technology has completed technical and silicon intellectual property AEC-Q100 verification and has been certified to the ISO 26262 automotive industry functional safety standard. Customer product tape-outs are expected to begin in 2023.

The N6 radio frequency (RF) technology received multiple customer product tape-outs in 2022. In addition, the second-generation N6 RF (N6 RF+) technology is under development, with the Process Design Kit (PDK) expected to be completed in 2023.

The 12FFC+ RF technology 1.0 version integrated circuit simulation program (SPICE) models and process design kits were released in 2022. This technology is developed on the same logic technology platform as N12eTM, targeting IoT wireless connectivity applications and the second wave of mobile RF customers.

The 16-nanometer FinFET compact (16FFC) RF technology received multiple customer product tape-outs in 2021. Its enhanced version (Enhancement I/II) technology was developed in 2022, supporting 28/39/47 gigahertz (GHz) millimeter wave RF front-end modules and 77GHz/79GHz automotive radar applications.

The 16FFC embedded magnetoresistive random access memory (MRAM) technology silicon intellectual property completed reliability verification in 2022, with a durability of one million cycle operations and reflow soldering capability. This technology is ready for production and is expected to complete the automotive AEC-Q100 Grade-1 reliability verification in 2023.

The 22ULL and 28-nanometer ultra-low leakage (28ULL) embedded resistive random access memory (RRAM) technology is TSMC's second-generation RRAM solution, offering a balance of cost and reliability. In 2022, multiple customers have adopted these technologies to complete product verification and begin mass production.

The 12-inch wafer 40-nanometer silicon on insulator (SOI) (N40SOI) technology provides a leading industry competitive advantage, receiving multiple customer product tape-outs in 2021 and starting mass production in 2022.

The six-inch silicon substrate gallium nitride (GaN on Silicon) technology has successfully passed customer product quality and reliability certification and was widely used in power supplies for various consumer electronics in 2022, with the advantages of energy saving and compactness. The development of the eight-inch silicon substrate gallium nitride technology is proceeding as planned and is expected to be launched in 2025, further supporting automotive electronic applications.

Continuously refining the complementary metal-oxide-semiconductor image sensor (CIS) technology, entering the next generation process, to further enhance the performance of advanced smartphone cameras. In 2022, TSMC continued to assist customers in bringing the world's smallest pixel products to the market. In addition, TSMC successfully completed the development of the world's first three-wafer stack global exposure image sensor technology, and this technology is ready for production.

For silicon photonics technology, TSMC is developing an innovative COUPE (COmpact Universal Photonics Engine) three-dimensional photonic stack technology, which can integrate silicon photonic chips and electrical control chips into a single chip optical engine. This optical engine can be co-packaged with high-speed computing chips, providing low energy consumption and high-speed signal transmission. In 2022, several test chips have been taped out and evaluated in the early stage, laying a solid foundation for future mass production.III. TSMC 3DFabric: TSMC's Advanced Packaging and 3D Silicon Stacking Technologies

TSMC-SoIC (System on Integrated Chip) chip-on-wafer (CoW) technology successfully entered mass production in 2022. By leveraging the CoW technology to stack Static Random Access Memory (SRAM) with logic chips, a significant performance improvement was demonstrated.

The TSMC-SoIC wafer-on-wafer (WoW) technology, by stacking 7-nanometer logic chips on embedded deep trench capacitor (DTC) chips, showcased excellent system performance enhancement in high-performance computing (HPC) products in 2022.

The CoWoS®-S (Chip on Wafer on Substrate with Silicon Interposer) technology, capable of integrating multiple system-on-chip (SoC), second-generation high bandwidth memory (HBM2E), and triple reticle size silicon substrates with embedded deep trench capacitors (eDTC), successfully mass-produced high-performance computing products for customers in 2022.

The CoWoS®-R (Chip on Wafer on Substrate with Redistribution Layer Interposer) technology, offering better signal integration with a redistribution layer (RDL) for high-performance computing products, successfully trial-produced in 2022 and is expected to enter mass production in 2023.

The InFO on Substrate (InFO_oS) technology, capable of integrating multiple system-on-chip to double reticle size fan-out packaging on substrates larger than 90mm by 90mm, successfully entered mass production in 2022.

The InFO_LSI (Integrated Fan-Out with Local Si Interconnect) technology, which integrates 5-nanometer system-on-chip with ultra-high-density chip interconnects, successfully mass-produced in 2022.

The fine-pitch array copper bump (Cu bump) technology applied to 4-nanometer wafer-level packaging successfully entered mass production in 2022.

TSMC stated that to maintain the company's technological leadership, TSMC plans to continue investing heavily in R&D. As TSMC's 3-nanometer and 2-nanometer advanced CMOS logic technologies continue to progress, TSMC's forward-looking R&D efforts will focus on technologies below 2 nanometers, 3D transistors, new memory, and low-resistance wires, establishing a solid foundation for future technology platforms. TSMC's 3DFabric advanced packaging R&D is developing innovations in subsystem integration to further enhance advanced CMOS logic applications. The company continues to focus on new specialty process technologies, such as RF and 3D smart sensors for 5G and smart IoT applications. TSMC's advanced research continues to develop new materials, processes, components, and memories that may be adopted in the next decade and beyond.

TSMC pointed out that the company also continues to collaborate with external research institutions such as academia and industry alliances, aiming to help customers understand and adopt cost-effective technologies and manufacturing solutions as early as possible. With a highly competent and dedicated R&D team and a strong commitment to innovation, TSMC is confident that it can drive future business growth and profitability by providing customers with competitive semiconductor technologies.Outlook for the Future

When discussing the future of the industry, TSMC (Taiwan Semiconductor Manufacturing Company) has indicated that in 2022, the company's steady growth in the field of integrated circuit manufacturing services comes from a strong and broad market demand. Major industry trends such as the popularization of 5G, the rapid growth of AI (Artificial Intelligence), and the acceleration of digital transformation have led to an increase in demand for smart phones, high-performance computing products, the Internet of Things (IoT), and automotive electronics. However, during this period, the supply chain of electronic products has also been burdened with high levels of excess inventory accumulated over the past two years due to the uncertainty of supply. As a result, in the second half of 2022, the supply chain of electronic products entered an inventory adjustment phase, affecting the growth of the integrated circuit manufacturing service industry and TSMC.

In 2023, under the circumstances of a high inflation environment and slowing economic growth, consumers' disposable income will be affected. Therefore, the overall demand for electronic products will decrease. In addition to the weak demand for electronic products, TSMC also estimates that inventory adjustments will continue in 2023, with a higher degree in the first half of the year. Under these two unfavorable factors, TSMC expects the global semiconductor (excluding memory) market to decline by a mid-single-digit percentage in terms of output value. In the long run, due to the increased use of semiconductors in electronic products, the continuous expansion of market share by fabless design companies, the increase in outsourcing manufacturing by integrated component manufacturers, and the increased adoption of proprietary special application components (ASICs) by system companies, TSMC expects that from 2022 to 2027, the growth of the integrated circuit manufacturing service industry will be more robust than the mid-single-digit compound annual growth rate of the global semiconductor (excluding memory) market.

The integrated circuit manufacturing service industry is located at the upstream of the entire semiconductor industry chain, and its performance is closely related to the market conditions of the main product platforms, including smart phones, high-performance computing, the Internet of Things, automotive electronics, and consumer electronics.

1. Smart Phones

Affected by the severe global COVID-19 pandemic, the Russia-Ukraine war, and high inflation, the unit shipment of smart phones declined by 11% in 2022, reflecting the slowdown of 5G commercialization and the rapid decline of the 4G market. This result has extended the overall replacement cycle. This situation may not be able to recover in the short term, and TSMC estimates that the smart phone market will show a low single-digit percentage decline in 2023. In the long run, as smart phones continue to evolve to 5G, coupled with higher performance, longer battery life, physiological sensors, and more AI applications, they will continue to drive the sales of smart phones.

High-performance and high-energy-efficiency integrated circuit technology is the basic requirement for mobile phone manufacturers, and highly integrated chips and advanced 3D packaging designs are the preferred solutions for optimizing cost, energy consumption, and specifications (chip area and height). Driven by the high-performance demands of AI applications, various complex software calculations, and high-resolution video processing, advanced process technology will continue to advance. TSMC is recognized as a leader in process technology for manufacturing highly integrated chips and advanced 3D packaging designs, and thus is in a very advantageous position in serving the smart phone market.

2. High-Performance Computing

High-performance computing platforms include personal computers, tablet computers, gaming consoles, servers, base stations, etc. In 2022, the unit shipment of major high-performance computing products declined by 11%, mainly due to high inflation, overall economic uncertainty, and overstock preparation leading to weak demand on the consumer side. At the same time, the upgrade cycle of servers and data centers remained relatively healthy to accommodate the rapid growth of information traffic and to meet the increasing demand for AI applications, as well as the continuous deployment of 5G base stations.

Although the digital transformation accelerated by COVID-19 has led to structural growth in semiconductor demand related to high-performance computing, economic headwinds will have a significant impact on the demand of both individual consumers and enterprise customers. Therefore, TSMC estimates that the unit shipment of high-performance computing products will show another low double-digit percentage decline in 2023. In the long run, as the industry begins to enter the 5G era, a more intelligent and interconnected world will stimulate a strong demand for computing power and low-energy computing. These all require higher performance and better power efficiency of central processors, graphics processors, network processors, AI accelerators, and related special application integrated circuits, and will drive the overall high-performance computing platform towards a richer semiconductor content, more advanced process technology, and 3D packaging. Based on the company's leading technology in these fields, these trends are favorable to TSMC.III. Internet of Things (IoT)

The IoT platform encompasses a variety of "smart" connected devices, such as wearables, speakers, health devices, home automation devices, and those used in cities and manufacturing. Due to the COVID-19 pandemic changing consumer lifestyles and work patterns, and accelerating digital transformation for businesses, the shipment of IoT devices grew by 18% in 2022, with smart health and smart retail/smart manufacturing devices being the main drivers of growth. This growth trend is expected to continue, but global inflation will have some impact on the shipment of consumer-related IoT devices, leading to a single-digit percentage growth in the shipment of IoT devices in 2023.

Furthermore, as IoT devices will incorporate more artificial intelligence functions, they will require higher-performance and more power-efficient control chips, networking chips, and various sensor chips. TSMC not only provides the industry's most advanced technology but also offers ultra-low power (Ultra-Low Power, ULP) and various specialized process technologies to enhance our customers' competitiveness, meet the industry's ESG sustainability needs, and help customers win the market.

IV. Automotive Electronics

Driven by improved chip supply, global car unit sales grew by 7% in 2022. However, some of this growth was offset by ongoing supply chain disruptions caused by the Russia-Ukraine war and sporadic work stoppages in China due to the spread of COVID-19. Entering 2023, it is expected that terminal demand will be affected by high inflation and macroeconomic uncertainty, with global car unit sales only experiencing low single-digit percentage growth.

The overall automotive industry is moving towards a more environmentally friendly, safer, and smarter direction, which will accelerate the adoption of electric vehicles (EVs), advanced driver assistance systems (ADAS), and smart cockpit infotainment systems, along with new electronic/electrical (Electrical/Electronic, E/E) architectures. All of these will drive an increase in demand for AP/MCU/ASIC processors, in-vehicle networking, sensors, and power management chips, thereby continuously increasing the semiconductor content in each car. TSMC offers a variety of automotive process technologies, enabling customers to provide competitive products in the automotive market.

V. Consumer Electronics

Logistics disruptions (such as port congestion) have extended the delivery time of the TV supply chain, affecting major retailers' overbooking and leading to excessive inventory in 2022. At the same time, inflation, interest rate hikes, and China's zero-COVID policy lockdowns have led to weak demand for TVs, set-top boxes (STBs), and other consumer products. Overall, affected by inventory adjustments and weak demand, the total shipment of the digital consumer electronics market in 2022 decreased by 11%.

Concerns about an economic recession may delay the recovery of demand in the digital consumer electronics market. It is expected that global digital consumer electronics shipments will show a low single-digit decline in 2023, with higher-end segments, such as large-screen TVs, 120Hz/144Hz high frame rate TVs, voice AI control, and WiFi6 wireless connectivity, continuing to show positive growth. In addition, regardless of when the economy recovers, TSMC's advanced technology will continue to assist customers in creating and providing differentiated innovative products in the DCE market.

TSMC finally stated that the supply chain of electronic products is long and complex, with each link closely connected. As a supplier at the upstream of the industrial chain, semiconductor component suppliers must provide sufficient and flexible supplies to cope with the intense changes in market demand, and the integrated circuit manufacturing service industry is an important role in ensuring the health and stability of the industrial chain. "As one of the leaders in the field of integrated circuit manufacturing services, we will continue to provide the most advanced process technology and scaled capacity needed for innovation in the downstream industrial chain." TSMC finally emphasized.