Taiwan tech giant TSMC sees strong chip demand

Taiwan tech giant TSMC sees strong chip demand

The logo of Taiwan Semiconductor Manufacturing Co TSMC is displayed at its headquarters in Hsinchu, Taiwan on January 19, 2021. REUTERS Ann Wang File Photo

TAIPEI, Jan 13, Reuters - Taiwanese chip firm TSMC expects to grow faster in the coming years due to the booming semiconductor demand, as the tech giant reported a record quarterly profit and plans to spend at least a third more than last year.

The high demand for semiconductors used in smartphones, laptops and other gadgets during the COVID-19 epidemic has led to a chip crunch, forcing automakers and electronics manufacturers to cut production but keep order books full at TSMC and other chipmakers.

Taiwan Semiconductor Manufacturing Co Ltd TSMC, a major Apple Inc AAPL.O supplier, also has customers such as Qualcomm Inc QCOM.O, which posted a 16.4% increase in fourth-quarter profits.

The company said it expects to lift capital spending to between $40 billion and $44 billion this year. It spent $30 billion last year.

TSMC announced in 2021 a $100 billion expansion plan over the next few years, as new technologies such as fifth-generation 5 G telecommunications technology and artificial intelligence applications also drive chip demand. The company is entering a period of higher structural growth Chief Executive C. C. Wei told an online earnings briefing.

The capacity of TSMC, Asia's most valuable listed firm and the largest contract chipmaker, expects to remain tight this year and demand to be sustained in the long term, Wei said.

With fully-loaded foundry capacity, TSMC's near-term order outlook remains healthy, according to analysts at Taipei-based Fubon Research in early January.

TSMC raised its compound annual growth rate targets for revenue to 15% -- 20% over the next several years due to a multi-year industry megatrend of strong chip demand boosted by new technologies.

Wei shrugs off market concerns about chip oversupply in the coming years and said a significant increase in silicon content in tech gadgets such as electric cars would help TSMC weather market corrections.

Wei said that even if a correction were to occur, we believe it could be less volatile for TSMC due to our technology leadership position and the structural megatrend.

The company had set a long-term target of 53% and higher for its gross margins, up from a previous target of 50% and higher TSMC predicted first quarter revenue to be in the range of $16.6 billion to $17.2 billion, compared to $12.92 billion in the same period a year ago. It expects to grow in the mid- to high 20 percent range for the year in U.S. dollar terms.

Revenue went up 24.1% to $15.74 billion in the October-December quarter. Net profit rose to T $166.2 billion $6.01 billion from T $142.8 billion a year ago.

That was higher than the T $161.6 billion average of 22 analyst estimates compiled by Refinitiv.

The shares of TSMC have gained 7% this year, giving it a market value of $618 billion. The stock was 0.15% higher on Thursday before the financial results were released, slightly underperforming the broader market TWII, which finished up 0.33%.