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Monday, February 6, 2023

TSMC Profit Beats Estimates Thanks to Long Chip Crunch

(Bloomberg) — Taiwan Semiconductor Manufacturing Co. raised its revenue growth projections and unveiled plans to spend up to $44 billion in 2022, a sign of confidence that tremendous demand for iPhones and chips will continue for years.

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Apple Inc. The U.S.’s most important chipmaker is now forecasting average sales growth of 15% to 20% annually — more than double its previous expectation. It expects sales of $16.6 billion to $17.2 billion in the first quarter alone, at least 5% ahead of estimates.

Those numbers confirm TSMC’s pole position in the market during an unprecedented chip shortage triggered by the pandemic, a deficit that has shut down production of cars, mobile phones and game consoles. Asia’s most valuable corporation intends for Samsung Electronics Co to continue spending heavily to maintain its technological edge over Intel Corp, which is gaining more market share as a growing number of connected devices such as car drive datacenters and high-end computing. protects.

With the crisis showing no signs of abating, TSMC has been operating at almost full capacity for the past year and is now investing heavily in new fab from its home island to Japan and the US. Capacity upgrades in 2022, over $10 billion over the previous year.

Click here for a blog summarizing TSMC’s post-earnings conference call.

According to research by Susquehanna Financial Group, the delivery time of chips increased by six days in December compared to November, to about 25.8 weeks. This interval marks the longest wait times since the data began tracking in 2017.

This spatial scarcity has been a boon for chipmakers. On Thursday, the Taiwanese company reported a better-than-expected 16% jump in December-quarter net income to a record NT$166.2 billion ($6 billion). It has set a long-term target of at least 53% for gross margin. Sales in the quarter reached NT$438.2 billion, also a record, based on previously released monthly revenue numbers.

What Bloomberg Intelligence Says:

TSMC’s capex plan of up to $44 billion for 2022 enables it to capture high growth in leading and specialized technology nodes and support its percentage sales-growth target of 15-20% CAGR. Its net cash position of $12 billion, along with consistent operating cash flow, is likely to support its large capacity-expansion plan while maintaining its dividend payout. The company has the ability to take on higher debt without significantly damaging its financial indicators.

–Cecilia Chan and Dan Wang, analysts

Click here to research

TSMC needs to boost capital expenditure plans, as they need to expand capacity to fully capitalize on the boom. The company had originally set aside a total of $100 billion to increase production over three years to 2023, and announced plans for a new plant in Japan and Arizona. It is also discussing manufacturing in Europe, although those discussions are more preliminary.

To secure supply, more customers are now paying in advance than just one or two in the past. Officials said TSMC made pre-payments of $6.7 billion in 2021.

“The semiconductor industry will continue to grow from the structural mega-trends of 5G and high-performance computing,” Chairman Mark Liu told analysts on a conference call Thursday.

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©2022 Bloomberg LP

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