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TSMC Profit Beats Estimates Thanks to Prolonged Chip Crunch

(Bloomberg) — The Taiwanese semiconductor maker raised its growth forecast and revealed record spending plans for 2022, suggesting that voracious demand for chips that fueled supply chain pressure for months will persist for years.

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Apple Inc, the top chip maker, now expects average sales growth of 15%-20% per year — double its previous forecast. The company expects sales of between $16.6 billion and $17.2 billion in the first quarter alone, at least 5% ahead of estimates. It plans to spend $40 billion to $44 billion to expand and modernize its capacity in 2022.

These numbers underscore TSMC’s position in the market during the unprecedented shortage of chips caused by the pandemic, a shortfall that has led to the production of cars, mobile phones and game consoles. Asia’s most valuable company intends to continue spending heavily to maintain its technology leadership on Intel Corp. To Samsung Electronics Co.

With no signs of receding in the crisis, TSMC has been operating at nearly full capacity for the past year and is now investing heavily in new Fabbas from its home island to Japan, and TSMC’s US spending target for 2022 has risen by at least $10 billion from last year and at least 43% higher than the $25 billion to $28 billion that Intel committed this year to regain its dominant position in the industry.

Read Tim Colban’s column on TSMC’s capex

Chip delivery times increased six days to about 25.8 weeks in December compared to November, according to research by Susquehanna Financial Group. The delay marks the longest waiting time since the company began tracking data in 2017. Chip equipment maker ASML NV jumped 3% Thursday.

The pressure was more prominent in industries including the auto industry, which wiped out an estimated $200 billion in sales for automakers such as Volkswagen AG and General Motors last year. Even Apple, TSMC’s biggest customer, isn’t spared: The iPhone maker said it lost $6 billion in sales due to component shortages in the three months to September, while losses from product restrictions will top $6 billion in the holiday quarter.

This endemic deficiency has been a boon to chip makers. On Thursday, the Taiwanese company reported a better-than-expected 16% jump in net income for the December quarter to a record NT$166.2 billion ($6 billion). He has set a long-term goal of at least 53% for gross margins. Sales for the quarter came to NT$438.2 billion, also a record figure, based on previously released monthly revenue figures.

What Bloomberg Intelligence says:

It appears that TSMC’s plan for capital expenditures for 2022 of up to $44 billion is set up to enable it to achieve high growth in the leading and specialized technology nodes and support the target percentage of sales growth of 15-20%. It appears that its net cash position of $12 billion, along with steady operating cash flow, will likely support its large plan to expand capacity while maintaining its dividend. The company has the ability to take on more debt without significantly hurting its financial metrics.

– Analysts Cecilia Chan and Dan Wang

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TSMC needed to boost its capital spending plans, as they needed to expand capacity to take full advantage of the boom. The company had originally set aside $100 billion to ramp up production over the three years through 2023, and announced plans to set up a new plant in Japan and Arizona. It is also under discussion about industrialization in Europe, although these discussions are preliminary.

To secure supplies, more customers are now paying up front, compared to just one or two before. Executives said TSMC took $6.7 billion in prepayments in 2021.

“The growth of the semiconductor industry will continue to be driven by the massive structural trends of 5G and high performance computing,” Mark Liu, Chairman of the Board of Directors, told Analysts in a conference call Thursday.

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

(Updates with market performance in the fifth paragraph)

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© Bloomberg LP 2022

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