TSMC Raises Expectations for Revenue Growth Despite a Slowdown in Chip Industry

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TSMC, a world-leading chip maker located in Taiwan, has seen its shares drop sharply amid an overall slowdown in the industry but is expected to maintain its dominant position with stronger revenue growth targets than last year.

Speaking at an investor conference on July 12, TSMC CEO C.C. Wei said that the company has raised this year’s sales growth forecast to 35 percent from the previous 30 percent predicted in June.

Earlier in June, CFO Wendell Huang said that TSMC was on track for 53 percent gross margin growth this year despite the deteriorating inflationary environment and increased costs for overseas plants.

The chip industry has also slowed down in 2022 due to a sluggish global economy, reduced consumer electronics demand, and rising inventories of products.

On July 5, TSMC’s market value hit a record low of NT$433 (about $14) a share, which had not been seen since November 2020—a devaluation of NT$6 trillion (about $0.2 trillion) compared to mid-January when shares were at NT$688 (about $23).

In the first half of 2022, TSMC stocks fell from 18,619 points to below 14,000 points in June.

However, Liu Peizhen, the supervisor of the Taiwan Industry Economics Services data bank, believes that TSMC is still in an outstanding position in the industry as its products are used in a fairly wide range of applications that make it less vulnerable to an economic shock.

Even though its annual shipment of consumer electronics products, which contain PCs and smartphones, is somewhat weak or even declining, there are other applications, such as high-performance computing, automotive electronics, logistic internet, servers, and cloud computing, playing a vital role in boosting orders to greatly offset the negative impact, Liu said.

Liu told The Epoch Times, however, that given its broad relevance to the global economy, the semiconductor industry will be severely impacted by end market demand. As a result, the industry will lessen its growth from last year’s peak, regardless of whether it scales up in Taiwan or worldwide.

Last year saw a boom in application areas of semiconductor products. But this year, the semiconductor industry’s growth is decelerating with a downward rate of 2.8-3.0 percent, which is mainly attributed to the Russia-Ukraine war, China’s zero-COVID19 lockdowns, and increasing inflation, Liu said.

There has been relatively weak demand in sales for personal computers, smartphones, and consumer electronics, orders for LCD driver ICs, IC-like products, sensor components, and some single chips.

However, the situation will move toward a more balanced supply and demand by next year, with the chip shortage of 2019-2021 expected to ease in 2023-2024.

After Samsung Electronics announced that it would produce chips with 3-nanometre (nm) technology on a large scale, some analysts questioned whether TSMC was lagging behind in its advanced processes.

But the qualified yield of such chips from Samsung is still an unknown, Liu said, adding that the South Korean company is unlikely to get many orders at the moment, and it may only have a handful of orders from Qualcomm and a chipmaker for Chinese cryptocurrency mining, with no others in sight.

Instead, TSMC’s 3nm process, which is scheduled for mass production in August, has already received orders from heavyweight customers. Therefore, in the second half of the year, be it 3nm, 5nm, or 7nm orders, TSMC will still be the biggest manufacturer for the majority of orders worldwide, for which it expects to achieve an 29-39 percent annual growth rate in consolidated revenue, Liu said.

In 2021, TSMC’s revenue totaled NT$1.59 trillion (about $53 billion)—an increase of 18.5 percent from the year prior, according to its annual financial report.

Yunyun Huang

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