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TSMC Shares Near Record High on Spending Hike, Growth Outlook

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·3-min read
TSMC Shares Near Record High on Spending Hike, Growth Outlook
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(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. shares edged toward fresh highs in Taiwan after raising growth projections and unveiling record spending, underscoring expectations the voracious demand that fueled a global chip crunch will persist.

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The world’s largest foundry jumped as much as 1.8%, boosting the benchmark Taiex index. Apple Inc.’s most important chipmaker is now projecting average sales growth of 15% to 20% annually -- as much as double its previous expectation. It intends to spend $40 billion to $44 billion expanding and upgrading capacity in 2022.

Those numbers affirm TSMC’s pole position in the market during an unprecedented chip shortage triggered by the pandemic, a deficit that’s walloped the production of cars, mobile phones and game consoles. It’s spending heavily to maintain its technological lead over Intel Corp. to Samsung Electronics Co., safeguarding its market share as the growing number of connected devices like cars drive datacenters and high-end computing.

What Bloomberg Intelligence Says

The $40 billion-plus full-year capital budget reflects management’s confidence on leading-edge node chips’ long-term demand strength and possible 15%-plus average annual growth over the next 2-3 years. Yet the spending plan, driven partly by fierce competition with Intel and Samsung for leadership in next-generation chipmaking technology, may weigh on the company’s free cash flow and lead to greater volatility in dividend payouts.

- Charles Shum, analyst

Click here for the research.

Read more: TSMC Capex Boosts Chip Outlook for 2022 and Beyond: Street Wrap

TSMC has been running at near-full capacity over the past year and is now investing heavily in new fabs from its home island to Japan and the U.S. TSMC’s 2022 spending target is up at least $10 billion from last year and more than 43% higher than the $25 billion to $28 billion Intel has set aside this year to regain its once-dominant position.

TSMC to Spend at Least $40 Billion to Address Chip Shortage

The squeeze has been most notable in industries including automaking, wiping out an estimated $200 billion in sales for carmakers such as Volkswagen AG and General Motors Co. last year. Even Apple, TSMC’s top customer, hasn’t been spared: the iPhone maker said it lost $6 billion in sales due to component shortages in the three months ended in September, while losses stemming from product constraints will exceed $6 billion in the holiday quarter.

Although an earlier share rally stalled after setting a record high in early 2021 -- due to fallout from supply-chain issues -- the Taiwanese chipmaker still delivered an annual gain of 16%. Its market capitalization has surged to NT$17.4 trillion ($627 billion), surpassing that of Tencent Holdings Ltd. to make it Asia’s most valuable company.

TSMC is “well-positioned” in the industry and has room for further price increases in the years to come, Randy Abrams, managing director and head of Taiwan equity research at Credit Suisse Group AG, said in a Bloomberg Television interview.

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