Taiwan’s TSMC reports record quarterly profit, will boost chip spending in 2022

Rising demand for semiconductors used in smartphones, laptops and other gadgets during the Covid-19 pandemic has led to a severe chip crunch, forcing automakers and electronics manufacturers to cut production while keeping order books full at TSMC and other chip makers.

Taiwan Semiconductor Manufacturing Corporation, specialty An apple (AAPL) The supplier who also has customers like Qualcomm (QCOM), posted a 16.4% increase in fourth-quarter earnings.

The company said it expects to increase capital spending to between $40 billion and $44 billion this year. Last year it spent $30 billion.

In 2021 TSMC announced a $100 billion expansion plan over the next few years, as new technologies such as 5G communications technology and AI applications also drive demand for chips.

Briefing online earnings, CEO CC Wei said the company is entering a “period of higher structural growth”.

Wei said TSMC, Asia’s most valuable listed company and the world’s largest chip maker, expects capacity to remain scarce this year and demand to continue in the long term.

“With the foundry capacity fully loaded, the near-term order outlook for TSMC remains good,” analysts at Taipei-based Fubon Research wrote in a note in early January.

With what it calls the “multi-year industrial megatrend” of strong demand for chips backed by new technologies, TSMC has raised its compound annual growth rate (CAGR) targets for the next several years to 15% to 20% from 10% to 15%.

Wei shrugged off market concerns about an oversupply of chips in the coming years and said a significant increase in “silicon content” in tech gadgets such as electric cars would help TSMC correct the weather in the market.

“Even if a correction occurs, we believe it could be less volatile for TSMC given our technology leadership position and massive structural orientation,” Wei said.

The company set a long-term target of “53% and above” for its gross margins, higher than the previous target of “50% and above”.

TSMC expects first-quarter revenue to be in the range of $16.6 billion to $17.2 billion, compared to $12.92 billion in the same period a year earlier. For this year, it is expected to grow in the mid to high range of 20% in US dollars.

In the October-December quarter, revenue rose 24.1% to $15.74 billion. Net profit rose to NT$166.2 billion ($6.01 billion) from NT$142.8 billion a year earlier.

That was above the NT$161.6 billion average of 22 analysts compiled by Refinitiv.

TSMC shares have gained about 7% so far this year, giving it a market value of $618 billion. The stock closed 0.15% higher on Thursday before the financial results were released, slightly underperforming the broader market, which closed 0.33% higher.

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