TSMC to Boost Chip Spending in 2022, Sees Multi-Year Growth Ahead

Taiwanese chip firm TSMC expects strong growth to accelerate in coming years due to booming semiconductor demand, as the tech giant on Thursday reported a record quarterly profit and said it plans to spend at least a third more than last year.

Soaring demand for semiconductors used in smartphones, laptops, and other gadgets during the COVID-19 pandemic has led to an acute chip crunch, forcing automakers and electronics manufacturers to cut production but keeping order books full at TSMC and other chipmakers.

Taiwan Semiconductor Manufacturing (TSMC), a major Apple supplier that also has customers such as Qualcomm, posted a 16.4 percent rise in fourth-quarter profit.

The company said it expects to lift capital spending to between $40 billion (roughly Rs. 2,95,700 crore) and $44 billion (roughly Rs. 3,25,210 crore) this year. Last year it spent $30 billion (roughly Rs. 2,21,760 crore).

TSMC announced in 2021 a $100 billion (roughly Rs. 7,390 crore) expansion plan over the next few years, as new technologies such as fifth-generation (5G) telecommunications technology and artificial intelligence applications also drive chip demand.

The company is entering "a period of higher structural growth", Chief Executive C. C. Wei told an online earnings briefing.

TSMC, Asia's most valuable listed firm and globally the largest contract chipmaker, expects capacity to remain tight this year and demand to be sustained in the long term, Wei said.

"With fully-loaded foundry capacity, TSMC's near-term order outlook remains healthy," analysts at Taipei-based Fubon Research wrote in a note in early January.

With what it calls a "multi-year industry megatrend" of strong chip demand boosted by new technologies, TSMC raised its compound annual growth rate targets for revenue over the next several years to 15 percent-20 percent from 10 percent-15 percent.

Wei shrugged off market concerns about chip oversupply in the coming years and said a substantial increase of "silicon content" in tech gadgets such as electric cars would help TSMC weather market corrections.

"Even if a correction were to occur, we believe it could be less volatile for TSMC due to our technology leadership position and the structural megatrend," Wei said.

The company set a long-term target of "53 percent and higher" for its gross margins, up from a previous target of "50 percent and higher".

TSMC forecast first-quarter revenue to be in the range of $16.6 billion (roughly Rs. 1,22,710 crore) to $17.2 billion (roughly Rs. 1,27,140 crore), compared with $12.92 billion (roughly Rs. 95,500 crore) in the same period a year earlier. For the year, it expects to grow in the mid -to-high 20 percent range in US dollar terms.

That was higher than the TWD 161.6 billion (roughly Rs. 43,270 crore) average of 22 analyst estimates compiled by Refinitiv.

TSMC shares have gained about 7 percent so far this year, giving it a market value of $618 billion (roughly Rs. 45,67,760 crore). The stock closed 0.15 percent higher on Thursday before the financial results were released, slightly underperforming the broader market which finished up 0.33 percent.

© Thomson Reuters 2022