Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said.
TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said.
The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s most advanced chips, Moody’s added.
Applications based on 5G technology and high-performance computing are expected to further enrich semiconductor content in devices, increasing demand for TSMC’s advanced technologies, it said.
Moody’s expects TSMC to maintain its leading position in the foundry industry over the next three years, as the chipmaker continues to develop and introduce new-generation technology nodes, including 3-nanometer chips.
TSMC’s leading position would generate strong revenue growth, better margins and a broader customer base, Moody’s said.
The company’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin this year is expected to improve to 67 percent from 63.7 percent last year, thanks to a higher gross margin and better factory utilization, Moody’s said, adding that the company’s EBITDA margin next year would increase to 68 percent.
With the company’s leading position in the global foundry industry and its strong ability to match customers’ diverse and increasing technological requirements, the ratings agency affirmed TSMC’s “Aa3” rating with a “stable” outlook.
“We expect that TSMC will maintain its prudent financial management with low leverage and a substantial net cash position, which provides it with ample flexibility to invest in and grow its technology leadership over the next two years,” Moody’s vice president and senior credit officer Chenyi Lu (魯振懿) said in a report.
TSMC is expected to generate consistent free cash flow over the next two years, driven by strong earnings growth and a relatively stable dividend policy, Moody’s said, adding that NT$4.5 billion in free cash flow is likely this year and NT$8.6 billion next year.
The chipmaker is expected to budget US$16.5 billion in capital expenditures this year and US$16 billion next year, up from US$14.9 billion last year, Moody’s said.
Such heavy investment is to support the production of 7-nanometer and 5-nanometer chips, and the development of 3-nanometer chips, the agency added.
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