TL;DR:
- TSMC expects over 20% revenue growth in 2024, thanks to high-end chip demand for AI applications.
- The company, a key supplier to Apple and Nvidia, sees itself as a crucial enabler of AI technology.
- Strong demand for advanced packaging is overwhelming, with capacity constraints continuing into the next year.
- CEO C.C. Wei expresses concerns about over-capacity in mature nodes across the industry but sees no issue for TSMC.
- TSMC plans global expansion, with fab plants in Germany, Japan, and the possibility of a third fab in Taiwan.
- Capital spending for the year remains consistent with 2023 levels, with a focus on high-performance computing and smartphones.
- Despite a 19% net profit dip in Q4 2023, TSMC exceeded expectations.
Main AI News:
In the realm of semiconductor technology, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) stands as an indomitable force. This global leader in contract chip manufacturing, renowned for its pivotal roles as a supplier to industry giants like Apple Inc and Nvidia, is poised for remarkable growth in 2024. TSMC anticipates an impressive surge of more than 20% in its revenue for the year, propelled by the soaring demand for high-end chips, primarily utilized in the dynamic field of artificial intelligence (AI). This projection comes at a time when the broader tech industry is grappling with sluggish sales of smartphones and electric vehicles.
At an earnings conference, CEO C.C. Wei underscored the pivotal role TSMC plays in the AI landscape. He asserted, “We are a key enabler for AI applications. So far today, everything you saw for AI comes from TSMC.” This statement reflects the company’s unyielding commitment to driving technological advancements in AI.
The appetite for TSMC’s advanced packaging solutions remains insatiable, with a resounding surge in demand. However, the company finds itself in the enviable position of being unable to provide sufficient capacity to satiate its customers’ hunger, a situation expected to persist into the following year.
Yet, amid these prospects of prosperity, Wei expressed a note of caution for the industry as a whole. He voiced concerns about an impending over-capacity crisis in the realm of mature nodes, where an excess of manufacturing capabilities may prove detrimental. Nevertheless, Wei emphasized that such concerns do not apply to TSMC, owing to the robust demand it enjoys for its specialty technologies.
In terms of expansion, TSMC is embarking on a global footprint expansion strategy. Construction at its fab plant in Germany is slated to commence in the fourth quarter of this year, and deliberations are ongoing regarding the technology node for a second fab in Arizona. Meanwhile, the first fab in Japan is set to open next month, with volume production scheduled for the fourth quarter. Further exploration into the establishment of a second factory in Japan is also underway.
TSMC’s capital spending for the year is projected to fall within the range of $28-$32 billion, consistent with 2023 levels. Additionally, the company is planning to expand its production capabilities in Taiwan. A tantalizing prospect on the horizon is the evaluation of constructing a third fab in Kaohsiung, Taiwan, with all three fabs dedicated to advanced 2 nanometre chips. This decision is primarily driven by the escalating demand fueled by high-performance computing and the relentless evolution of smartphones.
In financial terms, TSMC reported a 19% decline in net profit for the October-December quarter, amounting to T$238.7 billion ($7.6 billion). However, this dip was offset by a stronger-than-expected performance, surpassing the T$226.4 billion LSEG SmartEstimate.
Despite the challenges faced in 2023, TSMC anticipates robust growth in the upcoming year. It expects inventories to regain a healthy equilibrium, and in terms of revenue, 2024 is predicted to witness a notable upswing in the low to mid-20% range in U.S. dollar terms.
TSMC’s stellar performance has not gone unnoticed by investors, with its Taipei-listed shares surging by an impressive 32% in the past year. On Thursday, the company’s stock rose by 1.2%, outpacing the benchmark index, solidifying its market value at a remarkable $478.3 billion. As the landscape of technology continues to evolve, TSMC remains a formidable force, steadfast in its pursuit of innovation and growth.
Conclusion:
TSMC’s bullish outlook on AI-driven chip demand signals continued growth and dominance in the semiconductor market. Their role as a vital enabler for AI technology and expansion plans position them to capture substantial opportunities. However, concerns about industry-wide over-capacity warrant vigilance amidst a backdrop of evolving tech dynamics.
