TSMC expects steady investment after Q4 profit beats expectations

January 21, 2024

By Yimou Lee and Faith Hung

TAIPEI (Reuters) – Taiwanese chipmaker TSMC projected on Thursday steady capital spending for the current year and upwards of 20% revenue growth driven by demand for artificial intelligence.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chipmaker and a major Apple Inc and Nvidia supplier, also reported a quarterly net profit that beat market expectations.

Looking ahead, TSMC said it plans to expand its global manufacturing footprint, with construction at its fab plant in Germany expected to begin in the fourth quarter of this year. It

forecast capital spending at $28-$32 billion for this year, in line with 2023.

TSMC posted a 19% drop in net profit for the October-December quarter to T$238.7 billion ($7.6 billion) from a particularly strong year-ago quarter as global economic woes hit demand for chips used in applications from cars to cellphones and servers.

The profit, though, beat a T$226.4 billion LSEG SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.

“Our fourth quarter business was supported by the continued strong ramp of our industry-leading 3-nanometer technology,” said Wendell Huang, chief financial officer of TSMC.

He said the current quarter would be impacted by seasonlity of the smartphone business, which would be partially

offset by strength in its high-performance computing segment that includes AI chips.

TSMC, Asia’s most valuable listed company, said fourth-quarter revenue slipped 1.5% year-on-year to $19.62 billion, in line with the company’s previous forecast of $18.8 billion to $19.6 billion.

Capital expenditure in the fourth quarter was $5.24 billion, TSMC said, compared with $7.1 billion in the third quarter.

For the full year, capital expenditure came in at $30.45 billion, less than a prior forecast of $32 billion for 2023 and compared with a total of $36.29 billion spent in 2022.

TSMC expects steady investment after Q4 profit beats expectations — A smartphone with a displayed TSMC (Taiwan Semiconductor Manufacturing Company) logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

As the biggest maker of advanced chips, TSMC must navigate an uncertain industry outlook and a U.S.-China chip spat that could make it vulnerable.

While the company said 2023 was challenging, it forecast healthy growth for this year, adding that it expects inventories to return to a healthy level.

Revenue for 2024 should increase in the low to mid-20% range in U.S. dollar terms, it said.

TSMC’s Taipei-listed shares surged 32% last year. The stock rose 1.2% on Thursday ahead of the results versus a 0.4% gain for the benchmark index, giving the company a market value of $478.3 billion.

($1 = 31.5550 Taiwan dollars)