TSMC Profit Beats Estimates Thanks to Prolonged Chip Crunch

(Bloomberg) — Taiwan Semiconductor Manufacturing Co. raised its revenue growth projections and unveiled plans to spend as much as $44 billion expanding in 2022, signaling confidence that voracious demand for iPhones and chips will persist for years.

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Apple Inc.’s most important chipmaker is now projecting average sales growth of 15% to 20% annually — as much as double its previous expectation. It foresees sales of $16.6 billion to $17.2 billion in the first quarter alone, at least 5% ahead of projections.

Those numbers affirm TSMC’s pole position in the market during an unprecedented chip shortage triggered by the pandemic, a deficit that’s walloped the production of cars, mobile phones and game consoles. Asia’s most valuable corporation intends to continue spending heavily to maintain its technological lead over Intel Corp. to Samsung Electronics Co., safeguarding its market share as the growing number of connected devices like cars drive datacenters and high-end computing.

With the crunch showing no signs of abating, TSMC has been running at near-full capacity over the past year and is now investing heavily in new fabs from its home island to Japan and the U.S. It intends to spend $40 billion to $44 billion expanding and upgrading capacity in 2022, up more than $10 billion from last year.

Click here for a blog summarizing TSMC’s post-earnings conference call.

Delivery times for chips increased by six days to about 25.8 weeks in December compared with November, according to research by Susquehanna Financial Group. That lag marks the longest wait time since the firm began tracking the data in 2017.

That endemic shortage has been a boon to chipmakers. On Thursday, the Taiwanese company reported a better-than-expected 16% jump in December-quarter net income to a record NT$166.2 billion ($6 billion). It set a long-term target of at least 53% for gross margins. Sales in the quarter reached NT$438.2 billion, also a record, based on previously released monthly revenue numbers.

What Bloomberg Intelligence Says:

TSMC’s capex plan for 2022 of up to $44 billion looks set to enable it to capture high growth in leading and specialty technology nodes and support its percentage sales-growth target of 15-20% CAGR. Its net cash position of $12 billion, coupled with consistent operating cash flow, appear likely to support its sizable capacity-expansion plan while maintaining its dividend payout. The company has the capacity to take on more debt without hurting its financial metrics significantly.

– Cecilia Chan and Dan Wang, analysts

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TSMC needed to boost capital expenditure plans, because they need to expand capacity to fully capitalize on the boom. The company had originally set aside a total $100 billion to grow output over the three years to 2023, and announced plans for a new plant in Japan and Arizona. It’s also in discussions about manufacturing in Europe, though those discussions are more preliminary.

To secure supplies, more customers are now paying upfront, compared with just one or two before. TSMC took $6.7 billion of pre-payments in 2021, executives said.

“The semiconductor industry growth will continue to be fueled by the structural mega trends of 5G and high-performance computing,” Chairman Mark Liu told analysts on a conference call Thursday.

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