Japanese brokerage expects TSMC's sales to grow 14%-16% in 2020

10/11/2019 10:26 PM
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Taipei, Oct. 11 (CNA) A Japanese brokerage has forecast that Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, will post a 14 to 16 percent increase in sales from a year earlier in 2020 due to high demand from its four major clients.

In a research paper, the Japanese securities house said that amazed by TSMC's lead in high-end technology development over its peers, the company's four major clients - Chinese integrated circuit designer HiSilicon Technologies Co., U.S.-based IC designer Qualcomm Inc., American IC chip supplier Advanced Micro Devices Inc. (AMD), and U.S.-based consumer electronics giant Apple Inc. - will place more orders to the Taiwanese chipmaker in 2020.

Amid such optimism toward the chipmaker's business outlook, the brokerage has raised a target price on TSMC's shares to NT$330 (US$10.65) from NT$295, while leaving a "buy" recommendation on the stock unchanged.

On Wednesday, TSMC shares fell 1.57 percent to close at the day's low of NT$282.00 on the Taiwan Stock Exchange after a 3.06 percent increase on Tuesday as investors turned cautious about the high-level trade talks between Washington and Beijing set to open Thursday.

The local main board was closed Thursday and Friday for a long weekend holiday to celebrate the Oct. 10 National Day.

The Japanese brokerage said HiSilicon, an IC design arm of Chinese telecom equipment vendor Huawei Technologies Co., has become the second largest client of TSMC, accounting for about 15 percent of the Taiwanese chipmaker's total sales, only trailing Apple Inc.'s 20 percent.

The brokerage said HiSilicon is expected to raise its orders for TSMC's chips next year, taking advantage of the Taiwanese giant's sophisticated 7 nanometer process development, while Apple is expected to continue to favor TSMC's high-end technology over that of other chipmakers.

The Japanese brokerage said Qualcomm meanwhile is expected to contract TSMC to roll out its 5G chips through the 7nm process in 2020, while chips made on the 7nm technology are expected to make up 30 percent of AMD's total sales next year, up from less than 5 percent this year due to TSMC's contribution.

TSMC has announced its 7nm+ process began volume production in the second quarter of 2019, and is currently matching yields similar to the original 7nm process, which has been in commercial production for more than a year.

The trial production of chips made on the even more advanced 6nm process is scheduled for the first quarter of 2020, TSMC said.

The securities house said TSMC's four major clients are expected to contribute US$1 billion to US$1.5 billion in sales each to the company's revenue in 2020 and their orders are expected to help the Taiwanese manufacturer post a 14-16 percent year-on-year growth in the year, beating an earlier market estimate of a 12 percent increase.

In the first nine months of this year, TSMC posted NT$752.75 billion in consolidated sales, up 1.5 percent. At an investor conference held in mid-July, TSMC stuck to its earlier forecast that sales for 2019 will grow "slightly" from a year earlier.

The brokerage said TSMC is expected to benefit from solid demand from China, which has intensified efforts in 5G development, and from many of its clients' rebuilding of inventories in 2020.

As a result, the securities house has upgraded its forecasts of TSMC's earnings per share by 2.5 percent and 2.3 percent, respectively, for 2020 and 2021 to NT$15.15 and NT$17.24.

In the first half of this year, TSMC posted NT$4.94 in EPS, compared with NT$6.25 over the same period this year.

TSMC has scheduled an investors conference for Oct. 17 to detail the third quarter results and give fourth quarter guidance, which has been closely watched by investors at home and abroad.

(By Jeffrey Wu and Frances Huang)

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