TSMC’s outlook backs hopes for global tech recovery in 2024

TAIPEI - Taiwan Semiconductor Manufacturing Company expects a return to solid growth this quarter and gave itself room to raise capital spending in 2024, suggesting the world’s most valuable chipmaker anticipates a recovery in smartphone and computing demand.

The main chipmaker to Apple and Nvidia projected revenue growth of at least 8 per cent to US$18 billion (S$24 billion) to US$18.8 billion in the March quarter, versus expectations for around US$18.2 billion. And it is budgeting capital expenditure of US$28 billion to US$32 billion, potentially up from 2023’s US$30 billion.

TSMC’s outlook, while not quite surpassing the most bullish estimates, comes after a years-long slump in tech demand. But signs of a recovery for the chipmaking sector have emerged in recent weeks. The Semiconductor Industry Association estimated chip sales increased in November after more than a year of declines. TSMC chief executive C.C. Wei reiterated he expects a return to “healthy growth” in 2024.

TSMC, which also counts Android chipmaker Qualcomm among its biggest customers, got a boost from frenzied demand for Nvidia’s artificial intelligence chips in 2023. It reported net income for the fourth quarter of NT$238.7 billion (S$10.2 billion), beating the average analyst estimate. Revenue was US$625.5 billion, TSMC reported earlier, matching the previous holiday quarter and arresting a series of falls.

“Our business has bottomed out on a year-over-year basis, and we expect 2024 to be a healthy growth year for TSMC,” Mr Wei said.

TSMC’s revenue should grow in the low- to mid-20 per cent range in 2024, Mr Wei said. That is a rebound from the modest decline of 2023.

Over the course of 2023, TSMC moderated its capital expenditure plans as the consumer electronics industry grappled with a glut of unsold inventory. 

But uncertainty persists. In January, fellow chipmaker Samsung Electronics posted its sixth successive quarter of declining operating profit, as it weathered the impact of muted consumer demand in its own smartphone and memory businesses. 

Questions also overshadow China, the world’s largest computing, smartphone, Internet and chip market. 

Apple – long one of TSMC’s most important customers – faced headwinds with its latest iPhone generation. Several analysts downgraded Apple on expectations of soft demand, and financial services company Jefferies has said the iPhone sales slump in China is likely to deepen. The US company has also been hit by a widening ban on foreign-device use among Chinese agencies and state-owned companies. BLOOMBERG