TSMC upgrades 2024 sales growth forecast; plans more capex

Taipei, July 18 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC) on Thursday raised its sales growth for 2024 and said it will allocate more funds as capital expenditure this year.

At an investor conference, which has been watched closely by market analysts at home and abroad, Chairman C.C. Wei (魏哲家), said TSMC is expected to benefit from solid growth on artificial intelligence development this year.

As a result, the world's largest chipmaker has forecast sales growth of 24-26 percent from a year earlier in U.S. dollar terms, Wei said.

TSMC had previously forecast annual sales growth of 21-26 percent in April.

Wei said sales in the global semiconductor industry, excluding memory chip suppliers, are expected to grow about 10 percent in 2024, unchanged from TSMC's previous forecast and shy of the expected sales growth for the chipmaker.

Wei was presiding over the first investor conference as TSMC's chairman after taking over from Mark Liu (劉德音) in June.

Before the investor conference opened, TSMC released its second-quarter results, in which the chipmaker posted NT$247.85 billion (US$7.60 billion) in net profit in the April-June period, up 36.3 percent from a year earlier and also up 9.9 percent from a quarter earlier.

Its second-quarter earnings per share stood at NT$9.56, up from NT$7.01 a year earlier and up from NT$8.70 a quarter earlier.

Q3 outlook

As for the third quarter, Wei said chips used in smartphones and AI applications are expected to drive sales higher.

TSMC is believed to be the sole provider of chips for Apple Inc.'s iPhones, the next generation of which is set to be released in September.

Meanwhile, TSMC Chief Financial Officer Wendell Huang (黃仁昭) told the conference that revenue for the July-September period was forecast to range between US$22.4 billion and US$23.2 billion with the median figure up 9.5 percent from US$20.82 billion recorded in the second quarter.

TSMC's gross margin -- the difference between revenue and the cost of goods sold -- is expected to hit 53.5-55.5 percent in the third quarter, compared with 53.2 percent in the second quarter, Huang said.

Its operating margin -- the difference between sales, the cost of goods sold and operating expenses -- is expected to range between 42.5 and 44.5 percent in the third quarter, compared with 42.5 percent in the second quarter, Huang added.

Full-year capex update

Huang said capex for 2024 is expected to hit between US$30.0 billion and US$32.0 billion, up from an estimate of US$28.0 billion to US$32.0 billion made in April.

TSMC's capex has been monitored closely by analysts as how much the chipmaker will spend for production expansion reflects the company's assessment of demand.

Huang said TSMC tended to write its capex budget based on clients' needs over the next few years, and for 2024, its clients appear eager to secure TSMC's capacity to roll out chips used in AI development.

Huang said TSMC would assign 70-80 percent of its 2024 capex to advanced process development, 10-20 percent to mature and specialty process development, and 10 percent to advanced IC packaging and testing and photo-masking technologies.

As demand for high-end IC packaging services for chips related to AI applications remains strong, Wei said TSMC will continue to expand the capacity of its 3D Chip on Wafer on Substrate (CoWoS) IC packaging services, expecting capacity in the particular technology will more than double in 2024 and 2025.

Wei said he hoped a CoWoS supply crunch would ease in 2025 and return to equilibrium in 2026.

Wei added that TSMC, which is believed to roll out chips for U.S.-based AI chip designers such as Nvidia Corp. and Advanced Micro Devices, Inc. (AMD), will continue to work with back-end outsourced semiconductor assembly and testing service (OSAT) providers to come up with more CoWoS capacity to cater to its clients.

New plants

TSMC is building an advanced IC assembly plant in the Central Taiwan Science Park and is scheduled to provide CoWoS services in mass volume in 2025.

Another IC assembly plant in Zhunan, Miaoli County was inaugurated in June 2023.

TSMC broke ground on another advanced assembly plant in Chiayi in May but construction was suspended in June after the discovery of a suspected archaeological ruin.

According to TSMC, the compound annual growth rate (CAGR) sales growth of CoWoS will top 60 percent during 2022-2026.

In addition to CoWoS, Wei said, TSMC is developing the Fan-out Panel Level Packaging (FOPLP) integrated circuit packaging technology, which is more advanced than standard wafer-level packaging (WLP).

Wei said the FOPLP technology is expected to become mature in three years, with TSMC expected to get ready to provide the services.

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