TSMC jumps as investors bet on chip giant’s scale in downturn

TAIWAN Semiconductor Manufacturing (TSMC) surged as much as 4.6 per cent on Friday (Jan 13) after investors bet the world’s most valuable chipmaker would be among the first to emerge from an industry downturn in 2023.

TSMC executives addressed concerns about a prolonged chip crisis at its earnings announcement a day earlier, forecasting a small annual revenue growth and the beginnings of a recovery in the latter half of the year. Markets had been bracing for a far weaker outlook.

TSMC, the exclusive supplier of Apple’s silicon chips for iPhones and Macs, has the technology and scale to weather a slowdown better than most of its peers. Executives reiterated the company’s plans to ramp up next-generation 2-nanometer chips to meet demand for more powerful and energy-efficient silicon. The company began bulk production of advanced 3-nanometer chips last month.

Bloomberg analyst Charles Shum said: “TSMC will be the first of the world’s top five chip foundries to resume sales growth, probably in late 2023, while the semiconductor manufacturing industry will be dominated by smartphone and PC chip demand weakness through the year. Steady migration to next-generation process nodes, such as N3 in 2023, N2 in 2025, new specialty manufacturing capacity and 3D packaging technology, ensure the company’s long-term domination of the contract chipmaking market, and could help its long-term gross margin stay in the 53 to 60 per cent range, far above peers.”

TSMC’s contract chipmaking clients are slashing spending as recession fears prompt consumers to curb spending. At the same time, tightening US-China trade controls and rising interest rates and inflation also complicate the outlook.

TSMC logged a better-than-expected 78 per cent net income rise in the quarter just ended. First-quarter sales will be US$16.7 billion to US$17.5 billion, it said. BLOOMBERG