TSMC raises sales growth forecast for 2024 to almost 30%

Taipei, Oct. 17 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, on Thursday raised its forecast for year-on-year sales growth in 2024 to almost 30 percent in U.S. dollar terms.

At an investor conference, TSMC Chairman and CEO C.C. Wei (魏哲家) said in the current boom generated by the artificial intelligence era, chips used in tech gadgets such as graphics processing units (GPUs), AI accelerators and AI servers are expected to account for about 15 percent of total sales in 2024.

Under such favorable circumstances, Wei said, TSMC's sales for 2025 are expected to grow nearly 30 percent from a year earlier, an upgrade from its previous estimate of a 24-26 percent increase.

Global demand for AI applications is strong and such robust demand is just the beginning of the current AI era which is expected to continue for years, Wei said.

AI is expected to boost company efficiency and production quality so the technology will be used widely, he added.

Taking TSMC as an example, Wei said on the back of AI applications, whenever efficiency grows 1 percent, revenue is expected to increase by US$1 billion.

The AI boom continues to boost demand for the company's 3D Chip on Wafer on Substrate (CoWoS) IC packaging services, Wei said.

Although TSMC raised its production capacity in CoWoS by more than 200 percent this year from last year, supply still cannot meet demand. However, he said TSMC will try its best to meet clients' needs for that particular IC packaging technology, he added.

Echoing Wei, TSMC Chief Financial Officer Wendell Huang (黃仁昭) said growth in the company's IC packaging services is expected to beat the average in the industry as a whole over the next five years.

The chipmaker has forecast sales for the fourth quarter of this year will range between US$26.1 billion and US$26.9 billion, with the median figure expected to grow 13 percent, another new high, Huang said.

Before the investor conference began, TSMC reported net profit for the third quarter hit a new high of NT$325.26 billion (US$10.10 billion), up 31.2 percent from the previous quarter and also up 54.2 percent compared with the same period last year.

Its third quarter consolidated sales also reached a record high of NT$759.69 billion, beating an earlier forecast of US$22.4 billion to US$23.2 billion (NT$728 billion and NT$754 billion). TSMC used an exchange rate of NT$32.5 billion to make the third quarter estimate.

TSMC is expected to benefit from its efforts to boost production utilization and rein in costs. In addition, its gross margin -- the difference between revenue and the cost of goods sold -- will range from 57 percent to 59 percent in the fourth quarter, with the median figure estimated to grow 0.2 percentage points from the third quarter, Huang said.

TSMC's has forecast capital expenditure for 2024 will be slightly over US$30 billion, compared with an earlier forecast of US$30 billion to US$32 billion made in July, he added.

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

As TSMC anticipates demand for AI will stay strong, the capex for 2025 is expected to surpass that of 2024, with details about the 2025 capex budget to be released at the next investor conference, likely in January, he said.

According to TSMC, its capex reached US$6.4 billion in the third quarter, up 0.63 percent from the second quarter but down 9.8 percent from a year earlier. In the first nine months of this year, the chipmaker's capex totaled about US$18.53 billion, down 26.5 percent from a year earlier.

Meanwhile, electricity rates at TSMC's fabs in Taiwan topped those in its facilities overseas, and power bills are expected to affect its gross margin after the government raised electricity tariffs in recent years, Huang said.

In October, TSMC saw its electricity rate raised by 14 percent, after a 25 percent increase in the first half of this year, a 17 percent rise in 2023 and a 15 percent increase in 2022, according to Huang.