Taiwan Semiconductor Manufacturing Co. projected revenue ahead of estimates and predicted the worst could soon be over for the chip industry, bolstering a growing view that tech demand could recover from its post-Covid funk going into 2024.
(Bloomberg) — Taiwan Semiconductor Manufacturing Co. projected revenue ahead of estimates and predicted the worst could soon be over for the chip industry, bolstering a growing view that tech demand could recover from its post-Covid funk going into 2024.
The primary chipmaker to Nvidia Corp. and Apple Inc. projected sales of $18.8 billion to $19.6 billion this quarter and capital spending of $32 billion for 2023, both ahead of analysts’ expectations. While capex figure marked the lower end of a previous range, it surpassed the $30.5 billion estimated.
Chief Executive Officer C. C. Wei said the company was counting on the chip market hitting bottom “very soon,” after more than a year of post-Covid malaise. But he stopped short of calling a strong rebound because of uncertainty around China, the world’s largest computing arena, which is grappling with economic turbulence and growing US sanctions on its tech sector.
ASML Holding NV, a major supplier of chipmaking gear to TSMC, gained as much as 4.2% in Europe. Chip firms have over the past year worked through inventories built up during the Covid-era, when rolling lockdowns around the world forced millions online and ignited a surge in datacenter construction.
“We see early signs of demand stabilization in the PC and smartphone markets. Those two are the biggest segments for TSMC’s business,” Wei told analysts on a conference call. “We want to say that 2024 will have very healthy growth,” Wei added, though he emphasized it was too early to call a strong rebound.
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TSMC is also counting on a sustained boom in demand for chips to train AI services sparked by the advent of ChatGPT. Companies from the US to China are rushing to build artificial intelligence tools, which require the sort of high-end chips that the Taiwanese company dominates. It posted better-than-expected net income in the third quarter of NT$211 billion ($6.5 billion).
TSMC is “showing strong demand for its 3nm node from the likes of Apple, Nvidia and Intel,” Asymmetric Advisors analyst Amir Anvarzadeh said in a brief note after the numbers. “Solid margins and first real nod by the management that AI is starting to impact its utilization rates.”
For now, demand for semiconductors overall remains uncertain following a Covid-era boom in internet activity that fueled a surge in datacenter construction.
Washington’s constraints on China could reduce manufacturing orders to TSMC from US chip designers such as Nvidia for certain AI chips in the medium to long term, according to Bloomberg Intelligence analyst Charles Shum.
A day before TSMC’s report, ASML reported a big drop in order bookings for the September quarter. TSMC is one of ASML’s biggest customers and its slower spending was reflected in ASML’s results.
The Taiwanese company also makes iPhone chips, and demand for consumer gadgets has been affected by the downturn. Apple’s new iPhone 15 is selling far worse in China than its predecessor, reflecting stubbornly weak consumption as well as the rise of rivals like Huawei Technologies Co.
Still, supply chain bellwether Murata Manufacturing Co. said this week the global smartphone market has bottomed out and will resume growth this year.
Longer term, TSMC is spending heavily on chip plants around the world. Executives said its $40 billion Arizona site was on track to start production in 2025’s first half, while a Japanese plant is slated to begin mass output in late 2024.
Read more: Apple’s IPhones Off to Sluggish Start in China, Study Shows
–With assistance from Debby Wu, Gao Yuan and Betty Hou.
(Updates with comments on a market bottom from the first paragraph)
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