TSMC Forecasts Bullish Finish to 2021 on Sturdy Chip Demand


(Bloomberg) — Taiwan Semiconductor Manufacturing Co. forecast fourth-quarter gross sales and margins that exceeded some analysts’ estimates, as demand for chips stayed sturdy within the face of worsening snarls within the provide chain.

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The world’s No. 1 foundry mentioned Thursday it expects income of as a lot as $15.7 billion within the three months ended December, serving to full-year gross sales develop by about 24% in greenback phrases. Gross margin could also be as excessive as 53%, with executives reiterating a long-term goal of greater than 50%. Analysts had anticipated common gross sales of $15.3 billion and margin of 51.4% for the December quarter.

TSMC’s manufacturing will seemingly stay stretched by way of 2022, as demand for semiconductors that energy every part from automobiles to the most recent smartphones drove lead occasions to file highs and helped fill order books. With a purpose to safe provides, extra prospects at the moment are paying upfront, in contrast with simply “one or two” earlier than. However capability constraints have restricted the Taiwanese firm’s capability to totally capitalize on the increase, even because it put aside $100 billion to develop output over three years and introduced plans for a brand new plant in Japan.

“We count on TSMC’s capability to stay very tight in 2021 and all through 2022,” Chief Government Officer C.C. Wei mentioned on a convention name. “Whereas the short-term imbalances might or might not persist, we consider our know-how management will allow TSMC to seize the robust demand for our superior and specialty applied sciences.”

Learn extra: Apple’s supply-chain challenges

Bottlenecks elsewhere within the provide chain, together with in packaging and testing, in addition to snarls in logistics have weighed on the business. Apple Inc., which accounts for 1 / 4 of TSMC’s income as its greatest buyer, is more likely to slash its projected iPhone 13 manufacturing targets this yr by as many as 10 million models, Bloomberg Information reported this week.

Internet revenue for the three months ended September rose a stronger-than-expected 14% to NT$156.3 billion ($5.6 billion) on file income of NT$414.7 billion. Gross margin within the September quarter was a better-than-expected 51.3%, following enhancements in “backend profitability and a extra favorable know-how combine,” TSMC mentioned. It’s rebounding from an almost two-year low reached within the earlier three months, partly due to forex fluctuations.

TSMC will seemingly increase costs subsequent yr, Taiwanese media reported in August, a transfer that would assist offset considerations over margins. Executives declined to touch upon the reported will increase, saying solely that its pricing technique is “strategic, not opportunistic.”

“TSMC would be the final foundry to lift pricing throughout the ongoing semis scarcity as some friends have already enacted two to a few will increase,” Cowen Inc. analysts led by Krish Sankar wrote in a Oct. 11 report. “We count on semis shortages will ease by 2H22 as incremental foundry business capability come on-line.”

Essentially the most superior applied sciences accounted for 52% of TSMC’s income throughout the quarter, with 5 nanometer making up 18% and seven nanometer 34%. Growth of 3-nanometer know-how is “on observe,” with mass manufacturing anticipated within the latter half of 2022, executives mentioned Thursday.

“N3’s value is unquestionably greater than N5, that’s due to know-how complexity and we’ve got to make use of plenty of new gear, which has the next value,” Wei mentioned. “The ramp-up is similar to the earlier node, with many purchasers’ engagement truly greater than what we noticed within the earlier node.”

Smartphones proceed to be the most important contributor by product kind at 44% of complete income, whereas automotive prospects made up 4% of income, in step with the earlier quarter. TSMC has mentioned it would improve shipments to the sector, which has been among the many most badly affected by provide shortages.

“Current components such because the pandemic in Southeast Asia is affecting the automotive IC provide,” Wei mentioned, including that the corporate’s share of the worldwide auto chip market is about 15%. “We can’t clear up the complete business’s provide chain problem.”

TSMC will construct a specialty know-how fab in Japan beginning in 2022, with manufacturing anticipated two years later, Wei advised analysts Thursday. The corporate has assist from the Japanese authorities for the fab, which will likely be for the extra mature 22- and 28-nanometer applied sciences. Its personal board nonetheless must formally approve the plan, and funding within the facility will likely be “incremental” to the $100 billion capital spending it had beforehand introduced.

(Updates with outlook, firm feedback all through.)

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