AI expected to drive TSMC growth over next few years

Taipei, June 4 (CNA) Artificial intelligence development is expected to drive the growth of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) over the next few years, according to Mark Liu (劉德音), who stepped down as the chipmaker's chairman on Tuesday.

Presiding over the last annual general meeting after becoming TSMC chairman in 2018 in the wake of founder Morris Chang's (張忠謀) retirement, Liu said AI development is expected to push up demand for semiconductors and the company is good at rolling out chips used in AI applications.

Liu said he has faith in TSMC's growth over the next few years at a time when there will be a boom in AI, with industries around the world rushing to install applications, including AI servers, for production.

On the back of the company's lead over its peers in production technologies, TSMC is believed to provide advanced chips to U.S.-based AI chip designer Nvidia Corp. Liu's remarks echoed those of Nvidia CEO Jensen Huang (黃仁勳), who on Sunday in a speech in Taipei described AI as the driving force of a new worldwide industrial revolution.

TSMC is also expected to see significant growth in 2024, taking advantage of a relatively low comparison base over the previous year, Liu said.

At an investor conference in mid-April, TSMC maintained its forecast that sales for 2024 will grow 21-26 percent from 2023 in U.S. dollar terms, while downgrading its forecast of sales growth in the global pure play wafer foundry business to 14-19 percent from a previous estimate of 20 percent.

Despite TSMC's lead over its peers in technology development, the company will not become complacent, choosing instead to continue investing more in research and development as AI applications demand high performance computing capabilities and demand will not be satisfied, Liu said.

Liu added he was happy to see more and more countries develop "Sovereign AI," which refers to a nation's ability to produce AI applications by using its own infrastructure, data, workforce and business networks, a trend that is expected to further boost demand for advanced chips.

TSMC will try its best to meet demand from IC design clients in the AI era, he said, adding the company has built close ties with Nvidia and Nvidia's rival Advanced Micro Devices, Inc. (AMD).

Echoing Liu, C.C. Wei (魏哲家), who succeeds Liu to as TSMC chairman, starting Tuesday, said currently no other chipmaker is able to compete with the company and its efforts to upgrade production technologies will continue indefinitely.

When TSMC launches a new process, the process is improved every year from the very beginning, Wei said.

Wei offered the advanced 3 nanometer process, the latest technology TSMC started mass production with at the end of 2022, as an example, saying its 3nm process is better in 2024 than it was a year earlier, and will be even better in 2025, because the company has devoted itself to making improvements and has followed this blueprint for more than 30 years since its founding in 1987.

"TSMC is well positioned so that no others can compete with it," Wei said. "I believe such competitiveness will be maintained."

In terms of production capacity, Wei added that TSMC leads its rivals.

In late May, TSMC announced it will build seven new plants this year in a bid to boost its global competitiveness.

The seven plants -- three wafer plants and two packaging factories in Taiwan plus another two wafer plants overseas -- are being built or will be built to meet fast growing global demand for high-performance computing devices and smartphones.

When asked by reporters whether TSMC will move its production out of Taiwan to the U.S. in the event of an attack by China, Wei said he has discussed the matter with the company's American clients, but thought it unlikely TSMC would relocate all production in Taiwan overseas even if war breaks out, as Taiwan accounts for 80-90 percent of its total production.

In early April, TSMC announced its subsidiary TSMC Arizona signed a non-binding preliminary memorandum of terms (PMT) with the U.S. Department of Commerce, which will provide up to US$6.6 billion in direct funding under the CHIPS and Science Act.

While the U.S. holds a presidential election in November, which has created uncertainties in the market, Liu said, the election results are unlikely to change Washington's decision to provide subsidies to chipmakers like TSMC as the CHIPS and Science Act is a consensus reached by the Democratic and Republican parties.

Liu said he is more upbeat about the outlook for the AI market now than one year ago, adding TSMC will continue to assign capital expenditure to meet demand.

However, he still hopes the company will seek a balance between spending and dividend payouts to allow shareholders to share in its earnings.

TSMC Chief Financial Officer Wendell Huang (黃仁昭) said when the company finalizes its capex, it will assign about 70 percent of its disposable cash to pay dividends and the payout will be higher than the previous quarter and a year earlier.

In early May, TSMC announced it would pay a cash dividend of NT$4.0 (US$0.12) per share on 2024 first quarter earnings, beating the NT$3.5 cash dividend for the fourth quarter of 2023.

Currently, TSMC has no plan to launch a stock split as its share price is not so high to need a split to become affordable, Liu said.

On Tuesday, TSMC shares closed down 0.83 percent to end at NT$839.00 as investors locked in profits built a session earlier when the stock gained 3.05 percent.