TAIPEI (Reuters) – Taiwan Semiconductor Manufacturing Co Ltd (TSMC) reported its best quarterly profit and raised revenue and capital expenditure estimates to record levels as it predicted “multi-year growth opportunities”.
The world’s largest contracted chip maker is increasingly optimistic as remote work amid the coronavirus pandemic drives demand for advanced chips to power premium devices – demand that is expected to continue to increase as 5G technology and artificial intelligence applications are adopted more widely.
TSMC now expects to increase capital spending on advanced chip production and development to between $ 25 billion and $ 28 billion this year, up 60% more than the amount spent in 2020.
It also revised its compound annual growth rate targets for revenue during the period from 2020 to 2025 to 10% -15% from an earlier estimate of 5% -10%.
The demand for chips has been so high that manufacturers around the world are warning of the shortage. Several automakers have seen production plans affected by insufficient supply, leading TSMC to see a jump in demand from automakers in the fourth quarter.
“We are working with our customers to mitigate the impact of the scarcity,” CEO CC Wei told analysts in an online earnings briefing without giving details.
The shortage has several causes, say industry executives and analysts, including mass buying by Chinese technology giant Huawei Technologies, a fire at a chip factory in Japan, coronavirus blockages in Southeast Asia and a strike in France.
More fundamentally, however, there has been little investment in 8-inch chip factories owned mainly by Asian companies, which means that they have been struggling to increase production as demand for 5G phones, laptops and cars has increased faster than than expected.
Partly aided by the launch of Apple Inc’s iPhone 12, TSMC’s net income for the fourth quarter of October-December increased 23% to T $ 142.8 billion ($ 5.1 billion), beating a Refinitiv consensus estimate of T $ 135.39 billion. Revenue jumped 22% to a record $ 12.68 billion.
TSMC predicted that first quarter revenue would reach a new record between $ 12.7 billion and $ 13 billion, against $ 10.3 billion in the same period last year.
The chip maker’s stock price has risen more than 70% in the past 12 months, giving it a market value of $ 560.7 billion.
($ 1 = 28,0050 Taiwanese dollars)
Reporting by Yimou Lee and Ben Blanchard; Himani Sarkar and Edwina Gibbs edition