Macquarie Capital Ltd has raised its 12-month target price for shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) by 10 percent to NT$385, up from NT$350, on the back of a positive long-term outlook for the chipmaker.
The new target price implies a 13.6 percent upside from the stock’s closing price of NT$339 in Taipei trading on Friday. TSMC shares have surged 50.33 percent this year.
The Australian brokerage said that TSMC is expected to report strong revenue in the first quarter of next year, driven by rising demand for chips made using its 7-nanometer (nm) process for Apple Inc’s iPhone 11 series and the iPhone SE 2.
The second quarter of next year would likely be a transition period to the next-generation iPhone — for which application processor shipments would start in the third quarter — becoming a potential low point for TSMC, Macquarie said in a research note on Friday.
However, the demand for application processors made using TSMC’s 5nm process technology for Apple’s next-generation iPhones and Huawei Technologies Co’s (華為) new Mate-series models is poised to serve as a new growth driver for the chipmaker in the second half of next year, it said.
“We expect TSMC’s revenue to grow 16 percent year-on-year in full-year 2020. TSMC’s 4Q20 revenue will likely be the peak again next year, following the normal pattern,” Macquarie analysts led by Patrick Liao (廖光河) wrote in the note.
TSMC last week reported that cumulative revenue for the first 11 months of this year rose 2.7 percent year-on-year to NT$966.67 billion (US$31.9 billion), which analysts attributed to solid demand for smartphone chips and high-performance computing chips.
Industry associations WSTS Inc and SEMI have predicted a recovery in the semiconductor market next year after a steep drop this year, while International Data Corp expects the consumer semiconductor segment to grow at a compound annual growth rate of 6.4 percent from last year to 2023 on rising demand for consumer Internet of Things devices and home-automation products.
As the 5G infrastructure development worldwide is progressing faster than expected, semiconductor companies are generally expected to benefit from increased semiconductor content value in high-end handsets, it said.
There is little doubt that TSMC’s advanced 5nm manufacturing process slated for next year will help it further secure its industry leadership and expand its market share, industry watchers have said.
“We estimate Apple will occupy from 85 to 90 percent of [TSMC’s] total 5nm capacity, and the rest will be assigned to new Huawei Mate models,” Macquarie analysts said.
For the second half of next year, TSMC’s revenue is forecast to increase 8 percent from the first half and 6 percent from a year earlier, mainly driven by Apple’s new iPhone models; Huawei’s 5G smartphones and 5G base station applications; MediaTek Inc’s (聯發科) 5G smartphone system-on-chip products; and Qualcomm Inc’s high-end 5G smartphones chips, they said.
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