Taiwan Semiconductor Manufacturing Co. expects a return to solid growth this quarter and gave itself room to raise capital spending in 2024, suggesting the world’s most valuable chipmaker anticipates a recovery in smartphone and computing demand.
The main chipmaker to Apple Inc. and Nvidia Corp. is budgeting capital expenditure of US$28 billion ($37.58 billion) to US$32 billion — versus about US$30 billion in 2023 — and expecting revenue growth to bounce back to at least 20% for the year. It’s moving ahead with plans for chipmaking plants in Japan, Arizona and Germany — the first of which will begin mass production at the end of 2024 in a big boost to TSMC’s global footprint.
TSMC shares rose 8.1% to US$111.27 at 9.57 am in New York, their biggest intraday jump since May.
The Taiwanese company’s outlook, while not quite surpassing the most bullish estimates, comes after a years-long slump in tech demand. Executives also spent a chunk of time talking about the potential catalysts from the boom in AI development worldwide, which requires powerful chips that TSMC excels in fabricating.
Chief Executive Officer C. C. Wei, who’s set to take over the chairmanship from Mark Liu this year, reiterated he expects a return to “healthy growth.”
The results buoyed peers including TSMC-supplier ASML Holding NV, which rose more than 3% and led a rally in fellow European chip equipment stocks. The Philadelphia Semiconductor Index jumped as much as 3.2% during Thursday’s trading.
See also: China warns Japan of retaliation for possible new chip curbs
“Our business has bottomed out on a year-over-year basis, and we expect 2024 to be a healthy growth year for TSMC,” Wei said.
Signs of a recovery for the chipmaking sector have emerged in recent weeks. The Semiconductor Industry Association estimated chip sales increased in November after more than a year of declines. TSMC is projecting revenue growth of at least 8% to US$18 billion to US$18.8 billion in the March quarter, versus expectations for around US$18.2 billion.
See also: Samsung's profit falls again on uneven chip demand recovery
What Bloomberg Intelligence Says
TSMC’s ambitious 2024 revenue target, set at low-to-mid-20% growth, underscores its confidence in retaining high customer acceptance for its advanced N3 and N5 nodes, despite rising competition from Samsung and Intel and a slow recovery in smartphone and PC markets. The target rate surpasses both consensus estimates and the 13.1% global semiconductor sales growth forecast by the SIA.— Charles Shum, analyst
Unlike on previous calls, the conversation this time was dominated largely by Wei, who upon Liu’s retirement will become one of the industry’s most influential executives. Wei, who’s long adopted a lower profile, argued that TSMC will become a linchpin of the AI development boom, much as it helped fuel the smartphone industry alongside Apple.
TSMC’s revenue should grow in the low- to mid-20% range this year, Wei said, reversing the slight decline of 2023. It reported a 19% drop in net income for the fourth quarter to NT$238.7 billion ($10.2 billion), beating the average analyst estimate. Revenue was US$625.5 billion, TSMC reported earlier, matching the previous holiday quarter and arresting a series of falls.
But uncertainty persists. Over the course of 2023, TSMC moderated its capital expenditure plans as the consumer electronics industry grappled with a glut of unsold inventory.
This month, fellow chipmaker Samsung Electronics Co. posted its sixth successive quarter of declining operating profit, as it weathered the impact of muted consumer demand in its own smartphone and memory businesses.
Questions also overshadow China, the world’s largest computing, smartphone, internet and chip market.
Apple — long one of TSMC’s most important customers — faced headwinds with its latest iPhone generation. Several analysts downgraded Apple on expectations of soft demand, and Jefferies has said the iPhone sales slump in China is likely to deepen. The US company has also been hit by a widening ban on foreign-device use among Chinese agencies and state-owned companies.
“We expect 2024 to be a healthy growth year for TSMC,” Wei said. “We are all well-positioned to capture a major portion of the market in terms of semiconductor components in AI.”
