TSMC Expects Solid Growth in Q1 2024, Plans to Raise Capital Spending
Taiwan Semiconductor Manufacturing Co. (TSMC), the main chipmaker to Apple Inc. and Nvidia Corp., is anticipating a return to solid growth in the first quarter of 2024. The company also plans to raise its capital spending, indicating its confidence in a recovery in smartphone and computing demand. TSMC is budgeting capital expenditure of $28 billion to $32 billion for the year, compared to around $30 billion in 2023. It expects revenue growth to bounce back to at least 20% for the year.
Expanding Global Footprint
TSMC is moving forward with its plans for chipmaking plants in Japan, Arizona, and Germany. The first plant, located in Japan, is set to begin mass production at the end of 2024. This expansion will significantly boost TSMC’s global footprint and strengthen its position as the world’s most valuable chipmaker.
Catalysts from AI Development
During the announcement, TSMC executives highlighted the potential catalysts from the boom in AI development worldwide. The increasing demand for powerful chips, which TSMC excels in fabricating, is expected to drive growth in the semiconductor industry. Chief Executive Officer C. C. Wei emphasized the company’s expertise in AI development and expressed confidence in a return to “healthy growth.”
Signs of Recovery in the Chipmaking Sector
Recent weeks have shown signs of recovery for the chipmaking sector. The Semiconductor Industry Association estimated that chip sales increased in November after more than a year of declines. TSMC is projecting revenue growth of at least 8% to $18 billion to $18.8 billion in the March quarter, surpassing expectations.
Confidence in Advanced Nodes
TSMC’s ambitious revenue target for 2024, set at low-to-mid-20% growth, demonstrates its confidence in retaining high customer acceptance for its advanced N3 and N5 nodes. Despite rising competition from Samsung and Intel and a slow recovery in smartphone and PC markets, TSMC believes it will continue to be a linchpin of the AI development boom.
Uncertainty and Challenges
While TSMC remains optimistic about its growth prospects, uncertainties persist. The consumer electronics industry has been grappling with a glut of unsold inventory, leading TSMC to moderate its capital expenditure plans in 2023. Additionally, China, the world’s largest computing, smartphone, internet, and chip market, poses challenges for TSMC.
Apple’s Impact
Apple, one of TSMC’s most important customers, has faced headwinds with its latest iPhone generation. Several analysts have downgraded Apple due to expectations of soft demand, and the iPhone sales slump in China is likely to deepen. Furthermore, Apple has been affected by a widening ban on foreign-device use among Chinese agencies and state-owned companies.
Capturing the AI Market
Despite these challenges, TSMC remains confident in capturing a major portion of the semiconductor components market in AI. CEO C. C. Wei stated, “We are all well-positioned to capture a major portion of the market in terms of semiconductor components in AI.”
In conclusion, TSMC expects solid growth in Q1 2024 and plans to raise capital spending. The company’s confidence in a recovery in smartphone and computing demand, along with its expansion plans and expertise in AI development, positions it well for future success. However, uncertainties and challenges remain, particularly in the Chinese market and with the performance of key customer Apple. Nonetheless, TSMC is optimistic about its ability to capture a significant share of the AI market.
