Taiwan Semiconductor Manufacturing said Thursday that it expects revenue growth this year to be at least 20%, more than double the rate of the wider chip market. That should be good news for its customers
Nvidia
and
Apple,
although
TSMC
cautioned on short-term smartphone weakness.
TSMC
said it expects its full-year revenue to grow in the low-to-mid- 20 percentage range. The world’s largest third-party chip manufacturer is backing itself to outstrip the recovery in the wider semiconductor market, which it expects to grow by around 10% as demand for electronic devices recovers.
TSMC dominates the high-end chip manufacturing market, including the 3-nanometer and 2-nanometer chips that are expected to power the next generations of smartphones. TSMC makes chips for
Apple
iPhones,
Qualcomm
mobile chipsets, and processors made by
Advanced Micro Devices.
It is also the main manufacturer of artificial-intelligence chips for
Nvidia,
which leads the market for graphics processing units, or GPUs, used for AI applications.
American depositary receipts of TSMC were up 8.1% in premarket trading on Thursday. Nvidia was up 2.2% and Apple was up 2.2%.
In the short term the projection looks better for Nvidia than Apple, as TSMC said it expects strong demand for high-performance computing (HPC) applications—which include generative AI—but a weaker first-quarter for the smartphone market.
”Moving into first quarter 2024, we expect our business to be impacted by smartphone seasonality, partially offset by continued HPC-related demand,” said Wendell Huang, vice president and chief financial officer of TSMC.
TSMC projected that its first-quarter revenue will decrease to a level between $18 billion and $18.8 billion from $19.62 billion in the fourth quarter. However, it then expects growth in each subsequent quarter, with high-performance computing being a particular driver.
“The company commented that it is working with almost all smartphone vendors on 3nm [nanometer] technology, contrary to the view many investors hold that demand has been weak outside of Apple,” analysts at Jefferies wrote in a research note on Thursday. “On 2nm the business reiterated that it is seeing a much higher level of engagement than it did for 3nm at a similar stage, partially driven by AI-related applications,” they added.
TSMC expects capital expenditures in 2024 to be between $28 billion and $32 billion, compared with the $30.45 billion it spent in 2023. The company is investing $40 billion in manufacturing sites in Arizona, which are expected to supply chips to Apple from 2025.
However, TSMC on Thursday warned of a delay to production at the second of the two semiconductor plants it is building in Arizona. Company executives said that construction continued on the second factory, but TSMC was now looking at 2027 or 2028 as the timeline for volume production, from 2026 previously.
For the fourth quarter of 2023, TSMC said its net profit dropped 19% from the same period a year earlier to 238.71 billion new Taiwan dollars, ($7.56 billion). Quarterly revenue was broadly flat at 625.53 billion new Taiwan dollars. Fourth-quarter revenue from high-performance computing increased 17% and revenue from smartphones rose 27%.
Write to Adam Clark at adam.clark@barrons.com
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