Taiwan Semiconductor Manufacturing Co (TSMC) expects a return to solid growth this quarter and gave itself room to raise capital spending this year, suggesting the world’s most valuable chip maker anticipates a recovery in smartphone and computing demand.
The main semiconductor supplier to Apple and Nvidia Corp projected revenue growth of at least 8 per cent to US$18.8 billion in the March quarter, versus expectations for around US$18.2 billion. It is also budgeting capital expenditure of US$28 billion to US$32 billion, potentially up from US$30 billion in 2023.
The Taiwanese company’s outlook, while not quite surpassing the most bullish estimates, comes after a years-long slump in tech demand. But signs of a recovery for the chip-making sector have emerged in recent weeks. The Semiconductor Industry Association estimated chip sales increased in November after more than a year of declines.
TSMC chief executive C C Wei reiterated that he expects a return to “healthy growth” this year.
The Taiwan Semiconductor Manufacturing Co logo seen atop a building at the Hsinchu Science Park in Hsinchu, Taiwan, on January 9, 2023. Photo: Bloomberg
TSMC, which also counts Android chip design firm Qualcomm among its biggest customers, got a boost from frenzied demand for Nvidia’s artificial intelligence (AI) processors in 2023.
It reported net income for the fourth quarter of NT$238.7 billion (US$7.6 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.
“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.
TSMC’s revenue should grow in the low- to mid-20 per cent range this year, he said. That marks a rebound from the modest decline of last year.
Chip-making giant TSMC halts revenue drop on brisk AI demand
“TSMC could lead global chip foundries through 2023-24 industry headwinds, thanks to growing AI chip demand and migration to next-gen process nodes such as N3 in second half of 2023 and N2 by 2025,” Bloomberg Intelligence analyst Charles Shum said in a research note.
“Although the smartphone and PC chip market remains stagnant, TSMC’s advanced packaging tech, both 2.5D and 3D, fortifies its position in the contract-chip making market, allowing a potential return to a 53 per cent gross margin following a brief second-half downturn.”
Over the course of 2023, TSMC moderated its capital expenditure plans as the consumer electronics industry grappled with a glut of unsold inventory.
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Questions also overshadow mainland China, the world’s largest computing, smartphone, internet and semiconductor market.
Apple – long one of TSMC’s most important customers – faced headwinds with its latest generation of iPhones.
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