Taiwan Semiconductor Manufacturing (TSMC) announced on Thursday that it predicts a revenue growth of at least 20% this year. This rate is more than double the expected growth rate of the wider chip market. The positive outlook is welcome news for TSMC’s major customers, Nvidia and Apple, although the company did express some caution regarding short-term weakness in the smartphone industry.
TSMC is confident that its full-year revenue will grow in the low-to-mid-20 percentage range. As the world’s largest third-party chip manufacturer, TSMC is poised to outpace the recovery of the broader semiconductor market, which is projected to grow by approximately 10% due to increasing demand for electronic devices.
Notably, TSMC holds a dominant position in the high-end chip manufacturing market. It is responsible for producing the processors used in Apple’s iPhones, Qualcomm’s mobile chipsets, and Advanced Micro Devices’ processors. In addition, TSMC serves as the primary manufacturer of artificial intelligence chips for Nvidia, the leading player in the graphics processing unit (GPU) market used for AI applications.
In premarket trading on Thursday, TSMC’s American depositary receipts experienced a 5.2% increase. Nvidia also saw a rise of 1.8% while Apple’s stock climbed 1.6%.
Looking ahead, TSMC predicts a decrease in its first-quarter revenue to a range between $18 billion and $18.8 billion. This will follow the $19.62 billion generated in the previous quarter. However, the company anticipates growth in each subsequent quarter.
With its strong projected revenue growth and influential presence in chip manufacturing, TSMC remains well-positioned to continue its success in the industry.
Nvidia vs Apple: Short-Term Projections
In the short-term, Nvidia appears to have a more favorable projection than Apple. TSMC, the manufacturer of chips for both companies, anticipates strong demand for high-performance computing (HPC) applications, including generative AI. However, TSMC also expects a weaker first quarter for the smartphone market.
According to Wendell Huang, TSMC’s Vice President and Chief Financial Officer, the company foresees its business being affected by smartphone seasonality in the first quarter of 2024. However, this impact will likely be countered by continued demand for HPC-related applications.
TSMC has set its capital expenditures for 2024 in the range of $28 billion to $32 billion, slightly lower than the $30.45 billion invested in 2023. The company is currently directing $40 billion towards the establishment of manufacturing sites in Arizona. These facilities are slated to produce chips for Apple from 2025 onwards.
Unfortunately, TSMC recently announced a potential delay in production at the second semiconductor plant being constructed in Arizona. While construction continues, volume production is now projected to commence in 2027 or 2028, rather than the previously expected 2026.
Reflecting on TSMC’s financial performance, the net profit for the fourth quarter of 2023 decreased by 19% compared to the same period in the previous year, amounting to 238.71 billion new Taiwan dollars ($7.56 billion). However, quarterly revenue remained relatively stable at 625.53 billion new Taiwan dollars.
Furthermore, TSMC experienced a positive growth trend in fourth-quarter revenue, with a 17% increase in high-performance computing revenue and a 27% rise in revenue from smartphones.
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