OPEN APP
Home >Companies >News >TSMC to spend up to $28 billion to deepen tech as Intel founders
TSMC shares retreated on Thursday before the earnings results, snapping a 10-day rally that lifted its stock to a record high (REUTERS)
TSMC shares retreated on Thursday before the earnings results, snapping a 10-day rally that lifted its stock to a record high (REUTERS)

TSMC to spend up to $28 billion to deepen tech as Intel founders

  • About 80% of the outlay will be devoted to advanced processor technologies namely 3nm, 5nm and 7nm suggesting TSMC anticipates a surge in business for cutting-edge chipmaking
  • TSMC said the automotive industry had been “soft” since 2018 and demand only started to recover in the fourth quarter

Taiwan Semiconductor Manufacturing Co. expects to spend as much as $28 billion this year to expand its technological lead and construct a plant in Arizona to serve key American customers.

Capital spending for 2021 is targeted at $25 billion to $28 billion, compared with $17.2 billion the previous year, Chief Financial Officer Wendell Huang said on a conference call. About 80% of the outlay will be devoted to advanced processor technologies -- namely 3nm, 5nm and 7nm -- suggesting TSMC anticipates a surge in business for cutting-edge chipmaking. Intel Corp., which on Wednesday announced a new CEO, is said to be contemplating a departure from tradition and outsourcing manufacture to the likes of TSMC.

The Asian giant expects revenue of $12.7 billion to $13 billion this quarter, powering mid-teens sales growth this year.

The sheer scale of TSMC’s envisioned budget -- more than half its projected revenue for the year -- underscores TSMC’s determination to maintain its dominance and serve its biggest American clients. Shares of the world’s largest contract chipmaker have surged more than 70% since the start of 2020, with investors betting that the likes of Apple Inc. will continue to lean on its widening technological lead over Samsung Electronics Co. The company has become a lynchpin in a plethora of sectors including consumer electronics and automaking, with its chips powering everything from iPhones to fridges and cars.

What Bloomberg Industries Says:

TSMC’s $28 billion capital investment target for 2021 is 50% more than investors expected, and amounts to management’s strong vote of confidence in demand for smartphones and high-performance computing (HPC) chips over the next three years. The capital outlay target implies 2021 sales could leap to $56 billion, 4% higher than the $54 billion consensus expects, assuming 50% capital spending intensity.

-- Charles Shum, analyst

Net income in the quarter ended December climbed 23% to NT$142.8 billion ($5.1 billion), compared with the NT$137.2 billion average of analyst estimates, the chipmaker said Thursday. That contributed to a 50% increase in full-year profit, the speediest rate of expansion since 2010. Sales in the December quarter climbed 14% to a record NT$361.5 billion, according to previously disclosed monthly numbers, helped in part by robust demand for Apple’s new 5G iPhones.

TSMC shares retreated on Thursday before the earnings results, snapping a 10-day rally that lifted its stock to a record high. Supplier ASML Holding NV jumped as much as 4% in early trading Thursday.

The fourth-quarter results revealed increasing contributions from TSMC’s most-advanced 5-nanometer process technology -- used to make Apple’s A14 chips. That accounted for about 20% of total revenue during the quarter, more than doubling its share from the previous three months, while 7nm represented 29%. By business segment, TSMC’s smartphone business contributed about 51% to revenue, while HPC was at 31%.

As rivals like United Microelectronics Corp. fall behind and Semiconductor Manufacturing International Corp. struggles with American sanctions, TSMC’s pivotal role is likely to expand in 2021. The company has been racing to meet demand from larger-volume electronics clients, exacerbating a severe shortage of automotive chips that’s forcing firms like Honda Motor Co. and Volkswagen AG to curtail production.

TSMC said the automotive industry had been “soft" since 2018 and demand only started to recover in the fourth quarter. The company is working with its automotive customers to address the capacity supply issues, Chief Executive Officer C.C. Wei said, though he didn’t elaborate when the bottlenecks that forced carmakers to cut production could be resolved.

Executives didn’t address reports about potential orders from Intel on Thursday, saying that they don’t discuss specific customers. The Santa Clara, California-based chipmaker had held talks with the Asian firm after a series of inhouse technology slip-ups, people familiar have said, though it’s unclear whether the company may pivot after the appointment of a new CEO.

Executives reiterated that construction on a planned $12 billion plant in the southwestern US state of Arizona will begin this year. The factory will be completed by 2024, with initial target output of 20,000 wafers per month, though the company envisions having a “mega scale production site" over the long term, Chairman Mark Liu said.

Even as TSMC grows, foundries such as TSMC, UMC and Globalfoundries Inc. aren’t expanding fast enough to meet the pandemic-induced spike in demand for gadgets. Those bottlenecks snarled the flow of chips not just to cars, but also Xboxes and PlayStations and even certain iPhones. TSMC is by far the most advanced of the foundries responsible for making a significant portion of the world’s semiconductors, serving the likes of Qualcomm Inc. and NXP Semiconductors NV, which also supply the mobile and auto industries.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Close
×
Edit Profile
My Reads Redeem a Gift Card Logout