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TSMC to Increase Chip Spending in 2022, Anticipating Multi-Year Growth Due to Semiconductor Demand

Taiwanese chipmaker TSMC expects growth to pick up significantly in the coming years due to a surge in semiconductor demand, as the tech giant posted record quarterly earnings on Thursday and said it plans to spend at least a third more than last year.

The surge in demand for semiconductors used in smartphones, laptops and other gadgets during the COVID-19 pandemic has led to a sharp shortage of chips, forcing automakers and electronics manufacturers to cut production but keeping order books full at TSMC and other chipmakers.

Taiwan Semiconductor Manufacturing (TSMC), a major supplier to Apple that also has customers such as Qualcomm, reported a 16.4% increase in fourth-quarter earnings.

The company said it expects to increase capital spending to $40 billion (roughly Rs. 2,95,700 crore) and $44 billion (roughly Rs. 3,25,210 crore) this year. Last year he spent $30 billion (roughly Rs. 221,760 crores).

In 2021, TSMC announced a $100 billion (roughly Rs. 7,390 crore) expansion plan over the next few years as new technologies such as fifth-generation (5G) telecommunications technology and artificial intelligence applications also drive demand for chips.

The company is entering “a period of faster structural growth,” chief executive Xi Xi Wei said at an online earnings and loss briefing.

TSMC, Asia’s most valuable listed company and the world’s largest contract chipmaker, expects capacity to remain tight this year and demand to continue in the long term, Wei said.

“With the foundry at full capacity, TSMC’s short-term order prospects remain optimistic,” analysts at Taipei-based Fubon Research wrote in a note in early January.

With what the company calls a “multi-year industry megatrend” of high demand for chips driven by new technologies, TSMC has raised its target for compound annual revenue growth over the next few years to 15-20 percent from 10-15 percent.

Wei brushed aside market worries about oversupply of chips in the coming years and said a substantial increase in “silicon content” in tech gadgets like electric cars would help TSMC weather market adjustments.

“Even if a correction occurs, we believe it could be less volatile for TSMC due to our technology leadership and structural megatrend,” Wei said.

The company has set a long-term target of “53 percent or more” for its gross margin, compared to the previous target of “50 percent or more”.

TSMC forecasts first-quarter revenue to be in the range of $16.6 billion (roughly Rs. 122,710 crores) to $17.2 billion (roughly Rs. Rs 500 crores) in the same block. period a year earlier. During the year, growth is expected to be in the mid-to-high 20 percent range in dollar terms.

This was higher than Refinitiv’s 22-analyst average of NT$161.6 billion (roughly Rs. 43,270 crore).

TSMC shares are up about 7 percent this year, bringing their market value to $618 billion (roughly Rs. 45,67,760 crore). Shares closed 0.15% higher on Thursday before financial results were released, slightly trailing the broader market, which ended up 0.33%.

© Thomson Reuters 2022

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