April 9 – Taiwan Semiconductor Manufacturing Company (TSMC) announced it improved its fourth-quarter revenue by 16.7 percent year-over-year. The world’s leading pure-play foundry posted record earnings for its third consecutive quarter despite challenges brought about by the global component shortage.
Earlier this month, the firm revealed it would spend $100 billion over the next three years to enhance its production capacity.
Consequently, Citigroup believes TSMC’s current course will result in it becoming the world’s top semiconductor company by income by 2025.
TSMC’s Outstanding Q1 Performance
In the first three months of the year, TSMC made NT$362.4 billion ($12.7 billion) because of record demand for its chip-making services. CEO C.C. Wei recently told investors the company’s fabs have been running “over 100 percent utilization” in the last year. Despite the firm’s record-breaking recent success, Wall Street pegged its income at NT$360.5 billion ($12.6 billion).
The corporation will present a detailed breakdown of its Q1 earnings on April 15.
Nevertheless, a sizable portion of TSMC’s revenue came from leading-edge and expensive 5nm node. Last year, it became the first foundry to offer the advanced manufacturing process to its customers. Despite its newness, it brought in 20 percent of its sales in Q4 2020 from clients like Apple and Huawei. Since the electronics industry had time to become familiar with the technology, its 5nm node is in even greater demand.
In addition, TSMC made a significant adjustment to its operations in late January related to the global chip shortage.
The firm initiated a “super hot run” to rapidly fabricate automotive semiconductors for carmakers. Since the crisis emerged last year, multiple vehicle manufacturers had to reduce their output due to part supply insufficiencies. In doing so, it reduced its cycle time by as much as 50 percent but sidelined more lucrative electronic device part orders.
The company posting record Q1 revenue even after making the costly production shift suggests it will do very well in 2021.
TSMC on Track to Becoming World’s Largest Semiconductor Manufacturer
Although TSMC is doing exceptionally well, its leaders intend to expand the firm’s horizons even further. Previously, it planned to spend between $25 billion to $28 billion this year to expand its production capacity and advance its nodes. But earlier this month, the firm revealed it would invest around $33.3 billion annually over the next three years to meet overwhelming demand.
Roland Shu, a Citigroup analyst, believes the company’s TSMC’s growth drive will see it become the world’s top semiconductor manufacturer.
Shu argued the firm is moving to capitalize on long-term “megatrends” like the perforation of technologies like 5G and HPC. The foundry has the technology to make best-in-class chips that will support the rollout of those advances. By constructing new fabs, the analyst expects the company will take in $99.5 billion by 2024. He also predicts it will become the sector’s leading provider by revenue by the following year.
While the corporation is presently on a high growth trajectory, it faces major challenges in the next half-decade. Samsung wants to establish a state-of-the-art $17 billion facility in the U.S. to ramp up its foundry services income. Plus, Intel, the world’s foremost semiconductor firm, is investing $20 billion to create two pure-play manufacturing complexes in Texas.
Because of the level of competition it is facing, TSMC’s future is not set in stone. But the great production capacity established as it takes on the sector’s best players will benefit the larger chip ecosystem.