TSMC Forecasts Bullish End to 2021 on Strong 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.Three billion and margin of 51.4% for the December quarter.

TSMC’s manufacturing will possible stay stretched via 2022, as demand for semiconductors that energy the whole lot from automobiles to the newest smartphones drove lead occasions to file highs and helped fill order books. In order to safe provides, extra prospects at the moment are paying upfront, in contrast with simply “one or two” earlier than. But capability constraints have restricted the Taiwanese firm’s potential 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 expect TSMC’s capacity to remain very tight in 2021 and throughout 2022,” Chief Executive Officer C.C. Wei mentioned on a convention name. “While the short-term imbalances may or may not persist, we believe our technology leadership will enable TSMC to capture the strong demand for our advanced and specialty technologies.”

Read 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 largest buyer, is probably going to slash its projected iPhone 13 manufacturing targets this yr by as many as 10 million items, Bloomberg News reported this week.

Net earnings for the three months ended September rose a stronger-than-expected 14% to NT$156.Three 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 more favorable technology mix,” TSMC mentioned. It’s rebounding from a virtually two-year low reached within the earlier three months, partially due to foreign money fluctuations.

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

“TSMC will be the last foundry to raise pricing during the ongoing semis shortage as some peers have already enacted two to three increases,” Cowen Inc. analysts led by Krish Sankar wrote in a Oct. 11 report. “We expect semis shortages will ease by 2H22 as incremental foundry industry capacity come online.”

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%. Development of 3-nanometer know-how is “on track,” with mass manufacturing anticipated within the latter half of 2022, executives mentioned Thursday.

“N3’s cost is definitely higher than N5, that is because of technology complexity and we have to use a lot of new equipment, which has a higher cost,” Wei mentioned. “The ramp-up is very similar to the previous node, with many customers’ engagement actually higher than what we observed in the previous node.”

Smartphones proceed to be the biggest contributor by product sort at 44% of whole income, whereas automotive prospects made up 4% of income, consistent with the earlier quarter. TSMC has mentioned it should enhance shipments to the sector, which has been among the many most badly affected by provide shortages.

“Recent factors such as the pandemic in Southeast Asia is affecting the automotive IC supply,” Wei mentioned, including that the corporate’s share of the worldwide auto chip market is about 15%. “We cannot solve the entire industry’s supply chain challenge.”

TSMC will construct a specialty know-how fab in Japan beginning in 2022, with manufacturing anticipated two years later, Wei informed analysts Thursday. The firm 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 wants to 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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