(Bloomberg) — Taiwan Semiconductor Manufacturing Co. expects a return to solid growth this quarter and has given itself room to increase capital spending in 2024, suggesting the world's most valuable chipmaker is poised for a rebound in smartphone demand and computers.
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The main chip maker of Apple Inc. and Nvidia Corp. forecast March quarter revenue growth of at least 8% to $18 billion to $18.8 billion, compared to expectations of around $18.2 billion. And it projects capital spending of $28 billion to $32 billion, potentially higher than the $30 billion in 2023.
While the Taiwanese company's outlook doesn't quite beat the most optimistic estimates, it comes after a years-long slump in technology demand. However, there have been signs of recovery in the chip manufacturing industry in recent weeks. The Semiconductor Industry Association estimates chip sales rose in November after more than a year of declines. Chief Executive CC Wei reiterated that he expects a return to “healthy growth” this year.
TSMC, which also counts Android chip maker Qualcomm Inc. among its largest customers, benefited from rapid demand for Nvidia's artificial intelligence chips in 2023. The company reported fourth-quarter net income of NT$238.7 billion (US$7.6 billion), beating the average analyst estimate. As TSMC previously reported, revenue was $625.5 billion, in line with the same quarter last year and arresting a series of declines.
“Our business has bottomed out year-on-year and we expect 2024 to be a healthy growth year for TSMC,” Wei said.
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What Bloomberg Intelligence says
Thanks to increasing demand for AI chips and migration to next-generation process nodes like N3 in the second half of 2023 and N2 in 2025, TSMC could lead global chip foundries through industry headwinds in 2023 to 2024, both 2.5D and 3D , strengthens its position in the contract chip manufacturing market and enables a potential return to a gross margin of 53% after a brief downturn in the second half of the year.
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— Charles Shum, analyst
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TSMC's revenue is expected to grow in the low to mid-20% range this year, Wei said. That's a rebound from last year's modest decline.
During 2023, TSMC moderated its investment plans as the consumer electronics industry struggled with a flood of unsold inventory.
But the uncertainty remains. Chipmaker Samsung Electronics Co. posted its sixth straight quarter of declining operating profits this month as the company weathered the impact of subdued consumer demand in its own smartphone and memory businesses.
Questions also overshadow China, the world's largest computer, smartphone, internet and chip market.
Apple – long one of TSMC's most important customers – faced headwinds with its latest generation of iPhones. Several analysts downgraded Apple on expectations of weak demand, and Jefferies said the slump in iPhone sales in China was likely to worsen. The US company has also been hit by a growing ban on the use of foreign equipment by Chinese authorities and state-owned companies.
– With assistance from Debby Wu.
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