Taiwan Semiconductor Manufacturing Company (TSMC) is anticipating a strong growth year in 2024, as the global chip market begins to recover from a deep downturn. The company’s revenues are expected to increase by up to 25%, driven by robust demand for artificial intelligence (AI) technologies. TSMC’s CEO, CC Wei, expressed confidence in the company’s growth outlook, stating that it exceeds the forecast for the overall semiconductor market, which is expected to see a growth of over 10%.
In the current quarter, TSMC predicts a decrease in revenues of 6.2% compared to the previous quarter, in line with seasonal patterns. However, the company anticipates revenue growth in subsequent quarters. In the last three months of 2023, TSMC experienced significant revenue growth in high-performance computing applications, smartphone chips, and automotive applications.
TSMC’s capital expenditure is stabilizing after a period of extensive expansion in Taiwan and the construction of fabrication plants in the US and Japan. Wendell Huang, the company’s CFO, stated that the rate of increase in capital spending has begun to level off as they start to reap the benefits of their growth. TSMC expects its capital expenditure to remain flat at around $28 billion to $32 billion in 2024 compared to the previous year.
Despite a 19.3% drop in net profit for the fourth quarter of 2023 compared to the same period in 2022, TSMC’s net earnings slightly exceeded their guidance from three months ago. Gross margins also declined by 9.2 percentage points compared to the previous year but the company remains confident that it can achieve an average gross margin above that level in the long term.
TSMC’s competitors, Intel and Samsung, are advancing in the next generation of chip manufacturing technology known as N2. However, TSMC’s management dismissed concerns about losing their lead over competitors. They argued that Intel’s 18A technology, set to enter mass production this year, cannot be compared to TSMC’s N2 but is more similar to their N3P technology, which is already in volume production. TSMC’s chair, Mark Liu, highlighted the difference in approach between TSMC and Intel, with TSMC optimizing its technology for its customers while Intel focuses on its own products.
Overall, TSMC is optimistic about its growth prospects in 2024, driven by strong demand for AI technologies. The company’s focus on capital expenditure stabilization and its ability to maintain a competitive edge against rivals like Intel and Samsung position it well for future success in the global chip market.