Taiwan Semiconductor Manufacturing Co. (TSMC, Financial), the leading producer of advanced semiconductors, has revised its growth expectations for the chip industry, signaling a slowdown due to the underperformance of the smartphone and PC sectors.
The company now anticipates the semiconductor market to grow by about 10% in 2024, a reduction from its previous forecast. TSMC's CEO, C.C. Wei, also scaled back the growth outlook for the foundry business, despite maintaining the firm's investment plans of $28 billion to $32 billion for capacity expansion and technological advancements within the year.
Wei highlighted ongoing macroeconomic and geopolitical uncertainties that could dampen consumer enthusiasm and demand across markets. This announcement led to a significant drop in TSMC's American depository receipts, marking the largest single-day decline in over twelve months.
Despite the revised forecasts, TSMC reported a strong performance in revenue, surpassing expectations. This success is attributed to the burgeoning demand for artificial intelligence (AI) technologies, contrasting with the challenges faced by manufacturers focused on consumer electronics. The chipmaker's outlook is being closely watched as an indicator for the broader semiconductor industry, with other major players like ASML Holding NV and Intel Corp. also set to report their earnings soon.
TSMC has also announced its first quarterly profit increase in a year, driven by strong sales to major clients such as Nvidia Corp. (NVDA, Financial) and Apple Inc. (AAPL, Financial). The company projects revenues between $19.6 billion and $20.4 billion for the upcoming quarter, exceeding analyst predictions.
Despite the current market challenges, TSMC remains optimistic about achieving a revenue growth of at least 20% this year, buoyed by the recovery of the semiconductor market and the increasing demand for AI chips. The company also plans to commence mass production of its next-generation 2nm chips by the end of 2025, adjusting its timeline slightly from previous estimates.
However, recent earthquakes in Taiwan have impacted TSMC's production, leading to minor damage to some wafers and a slight decrease in profit margins for the next quarter. The long-term outlook remains positive, with AI chip revenue growing at a 50% annual rate, despite some investor concerns about the sustainability of this demand.
Wei reassured stakeholders of the company's commitment to meeting the high demand for AI chips, although he acknowledged the challenges in increasing capacity swiftly enough to address the current shortage.
