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Ming-Chi Kuo: Apple reduces TSMC’s 5nm capacity utilization, but this is not due to low demand for iPhone 12
13.12.2021 [18:08],
Konstantin Khodakovsky

Stock quotes of Apple suppliers fell after forecasts that Apple in the first quarter of 2021 will load “only” 80% of TSMC’s 5nm capacity instead of 100% in the fourth quarter of the outgoing year. This is believed to be due to the relatively low demand for the iPhone 12 series. However, the well-known analyst at TF Securities Ming-Chi Kuo believes that not everything is so simple.

The market shouldn’t pay too much attention to how much of TSMC’s 5nm production is used by Apple, he said. Changes in Apple’s production volumes are more due to seasonality than low demand for iPhone 12. In an analytical note for investors, the analyst writes that it would be overly optimistic to believe that Apple’s 5nm TSMC capacity utilization in the first quarter of 2021 will be at the same level of 100%. “If the fall in shares was caused by false expectations, their price is likely to rise again soon,” suggests Mr. Kuo.

Calculations from TF Securities show that in fact, Apple orders for components for the iPhone 12 in the first quarter of 2021 will be slightly higher (by 3-5%) than in the same period a year ago. And in the second quarter of 2021, according to analysts, Apple should ship at least 45 million smartphones to the market – significantly more than 36 million units in the second quarter of 2021.

Moreover, Ming-Chi Kuo says demand for the iPhone 12 Pro series is significantly higher than expected. Because of this, there is a shortage of camera modules, the lead time of which from the only supplier – Sony – is up to 14 weeks. Analyst expects some shortage of flagship iPhones to persist in the near term. Overall, according to TF Securities, the general trend in consumer interest in iPhones is still higher than in Android devices, and demand for Apple smartphones is still unabated.

Such a change in the utilization of 5nm production facilities is unlikely to affect TSMC’s revenue either. In October, financial results showed that only 8% of total silicon wafer revenue came from 5nm orders. In addition, unused Apple capacities can be loaded with orders from other manufacturers.