Taiwan Semiconductor Predicts Sales Growth in First Quarter Amid Chip Demand

Taiwan Semiconductor Manufacturing (TSM), also known as TSMC, exceeded analyst predictions for fourth-quarter earnings and provided an optimistic outlook for the coming year. TSM stock witnessed an increase in early trading.

The world’s largest contract chip manufacturer reported earnings of $1.44 per U.S. share on sales of $19.62 billion in the December quarter, surpassing FactSet’s estimated earnings of $1.38 a share on sales of $19.68 billion. Despite four consecutive quarters of declining revenue on a year-over-year basis, TSMC anticipates a return to growth in the current quarter, despite challenges in chip demand for smartphones and automobiles.

For the first quarter, TSMC forecasts revenue in the range of $18 billion to $18.8 billion, with the midpoint of $18.4 billion exceeding Wall Street’s target of $18.27 billion. In the first quarter of the previous year, TSMC generated revenue of $16.62 billion.

Chief Financial Officer Wendell Huang stated, “Moving into first-quarter 2024, we expect our business to be impacted by smartphone seasonality, partially offset by continued HPC (high-performance computing)-related demand.”

TSMC’s outlook suggests a potential prolonged downturn, but the chipmaker anticipates revenue growth of more than 20% in 2024, driven by high-end chips used in artificial intelligence applications.

Notable customers of TSMC include Apple (AAPL), AMD (AMD), Nvidia (NVDA), Qualcomm (QCOM), and others. TSM stock, having recently broken out, rose 6.5% to 109.63 in premarket trading.

In addition, TSMC plans to delay production at its second semiconductor plant in Arizona, with volume production expected to commence in 2027 or 2028. The company estimates capital expenditures of $28 billion to $32 billion in 2024, compared to $30.45 billion spent in 2023. Taiwan Semiconductor holds the fourth position out of 32 stocks in IBD’s semiconductor manufacturing industry group, with an IBD Composite Rating of 78 out of 99.