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TSMC forecasts sales to grow by over 20% in 2024

01/18/2024 10:32 PM
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TSMC CEO C.C. Wei (left) and Chairman Mark Liu (center) at an investor conference Thursday. CNA photo January 18, 2024
TSMC CEO C.C. Wei (left) and Chairman Mark Liu (center) at an investor conference Thursday. CNA photo January 18, 2024

Taipei, Jan. 18 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, on Thursday said it will return to healthy growth in 2024 after a slump in 2023, with sales forecast to grow by more than 20 percent from a year earlier this year.

In an investor conference, C.C. Wei (魏哲家), TSMC's CEO, said due to the company's lead over its rivals in advanced technology development, the chipmaker is expected to enjoy a year-on-year sales increase of 21-26 percent in 2024, higher than an expected 20 percent increase in the global pure play wafer foundry industry.

TSMC's sales growth is also expected to beat an expected 10 percent year-on-year increase in the global semiconductor industry, excluding the memory chip segment, in 2024, Wei said.

Ahead of the investor conference, TSMC unveiled its fourth-quarter results, revealing a 13.1 percent increase in net profit compared to the previous quarter, reaching NT$238.71 billion (US$7.55 billion). This growth was attributed to robust demand for its advanced 3-nanometer process, which offset the impact resulting from the overall decline in demand in the global semiconductor industry.

For the entire 2023, TSMC's net profit fell 17.5 percent from a year earlier to NT$838.50 billion, while consolidated sales dropped 4.5 percent from a year earlier to NT$2.16 trillion.

Wei said production of the 3nm process, the latest technology TSMC began commercial production for at the end of 2022, increased significantly in the second half of last year, and the particular technology accounted for about 6 percent of the company's total sales in 2023.

Boosted by strong demand for smartphones and high performance computing (HPC) devices, the 3nm process is expected to make up 15 percent of TSMC's total sales in 2024.

For the first quarter of this year, TSMC consolidated sales are expected to range between US$18.0 billion and US$18.8 billion, with the median figure of US$18.4 billion expected to fall about 6.2 percent from a quarter earlier on seasonal factors, TSMC Chief Financial Officer Wendell Huang (黃仁昭) told investors.

Huang said despite solid demand for HPC devices, smartphone sales could be affected by slow season effects in the first quarter, which will push down TSMC's sales during the January-March period.

According to Huang, TSMC's gross margin -- the difference between revenue and the cost of goods sold -- is expected to range between 52 percent and 54 percent in the first quarter, compared with 53.0 percent a quarter earlier.

In addition, TSMC's operating margin -- the difference between sales, the cost of goods sold, and operating expenses -- is forecast to range between 40 percent and 42 percent in the first quarter, compared with 41.6 percent in the previous quarter.

Huang said TSMC's capital expenditure is expected to range from US$28.0 billion to US$32.0 billion in 2024, adding that the capex budget has been written based on anticipated demand from its clients over the next few years.

Huang said TSMC will assign 70-80 percent of its 2024 capex to advanced process development, 10-20 percent to mature and specialty process development, and 10 percent for development of advanced IC packaging and testing, as well as photomasking technologies.

In 2023, TSMC's capex totaled US$30.45 billion, which failed to meet a previous forecast of US$32 billion made in mid-October. The 2023 capex also fell 16.1 percent from 2022's US$36.29 billion.

Huang said the lower capex in 2023 came after TSMC took into account short term market uncertainties.

In the fourth quarter, TSMC's capex hit US$5.24 billion, down 26.2 percent from the third quarter and also down 51.5 percent from a year earlier, according to the chipmaker.

As demand for high-end IC packaging and testing services for chips related to artificial intelligence applications remains strong, Wei said TSMC will continue to expand capacity of its high-end IC packaging and testing capacity into 2025 as the current capacity cannot satisfy its clients.

Wei said the compound annual growth rate (CAGR) sales growth of high-end IC packaging and testing services including Chip on Wafer on Substrate (CoWoS), 3D IC, System on Integrated Chips (SoIC), is expected to top 50 percent over the next few years, adding that TSMC will continue to develop the next generation CoWoS technologies.

Also in the investor conference, TSMC Chairman Mark Liu (劉德音) said the company's overseas expansion is proceeding as planned with a wafer plant in Kumamoto, Japan slated to open on Feb. 24 and commercial production scheduled to begin in the fourth quarter of this year.

The Kumamoto plant will focus on specialty process development and will roll out chips made on the mature 12nm, 16nm, 22nm and 28nm processes.

At home, TSMC said it is evaluating the possibility of building a third 2nm process fab in Kaohsiung in the wake of strong demand.

Currently, TSMC is building a 2nm fab in Hsinchu, which is scheduled to begin commercial production in 2025. The company plans two 2nm fabs in Kaohsiung, but no exact timeframe is available.

Liu, who has announced he will retire in June, said he was proud to have worked for TSMC for 30 years.

During his tenure as TSMC's chairman after he succeeded Morris Chang (張忠謀) in June 2018, the chipmaker kept its commitment to provide reliable technologies and production to its clients, while insisting on honesty, integrity, innovations and trustworthiness for its growth, Liu said.

TSMC's success is determined by its high efficiencies and effective cost control, as well as its ability to maintain its lead over its peers in technology development and maintian it's competitive edge in the global market, Liu said.

He said TSMC's global expansion, leadership in digital transformation, sustainability and corporate governance have helped to maximize value for clients and shareholders.

(By Chang Chien-chung and Frances Huang)

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