Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares rose 3.79 percent last week ahead of the company’s earnings conference on Thursday, outperforming the broader market’s 2.07 percent increase.
Yuanta Securities Investment Consulting Co (元大投顧) has retained its “buy” rating on the stock, with a 12-month target price of NT$584, expecting TSMC to maintain its tech leadership in the semiconductor industry.
The target price represents a 33.33 percent upside from the stock’s closing price of NT$438 on Friday in Taipei trading.
Photo: I-Hwa Cheng, Bloomberg
“Although TSMC is not immune to inventory adjustments in the short term, we are still optimistic about its leadership position and expect the advanced process technologies to boost its medium and long-term operational momentum,” Yuanta said in a client note on Friday.
“TSMC’s outlook is still good with stable profit prospects compared to second-tier foundries,” it said, adding that any significant correction in the near term would represent an opportunity to accumulate the stock for the long term.
TSMC on Friday reported third-quarter revenue of NT$613.14 billion (US$19.36 billion), up 14.79 percent from the previous quarter and an increase of 47.85 percent from a year earlier.
The contract chipmaker’s record quarterly revenue came as major customer Advanced Micro Devices Inc (AMD) on Thursday said that third-quarter sales would miss a prior forecast amid weaker-than-expected demand for PCs. In August, Nvidia Corp, another major customer, predicted that sales would fall short of its expectations for the latest quarter, largely due to weakness in the gaming market.
TSMC is scheduled to report its third-quarter earnings result on Thursday, and the market’s focus is to be on the chipmaker’s capacity utilization, the progress in its advanced process technologies and plans for price hikes, Yuanta said.
Additionally, investors are expected to observe whether TSMC retains its revenue growth forecast of an annual compound rate of 15 to 20 percent over the next few years, while also paying attention to the chipmaker’s capital spending estimate for next year and when its customers’ inventory adjustments might end, the note said.
“We expect the inventory adjustments triggered by the declining end-market consumer demand to impact TSMC’s sales from the fourth quarter this year to May next year,” Yuanta said.
Sales would resume growth from the third quarter next year, driven by the 5G, artificial intelligence and high-performance computing trends, with a significant contribution from 3-nanometer process technology, it said.
Many IC design companies have reportedly received TSMC’s notices of price hikes. If true, the benefits of price increases would gradually emerge from January next year to help boost TSMC’s average selling prices by about 3 percent, contributing to 9.1 percent sales growth annually next year, Yuanta said.
TSMC’s capital spending for next year is forecast to fall by 5 to 10 percent in US to between US$36 billion and US$38 billion, Yuanta said, citing the long lead times for equipment delivery and inventory adjustment risk.
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
VERTICAL INTEGRATION: The US fabless company’s acquisition of the data center manufacturer would not affect market competition, the Fair Trade Commission said The Fair Trade Commission has approved Advanced Micro Devices Inc’s (AMD) bid to fully acquire ZT International Group Inc for US$4.9 billion, saying it would not hamper market competition. As AMD is a fabless company that designs central processing units (CPUs) used in consumer electronics and servers, while ZT is a data center manufacturer, the vertical integration would not affect market competition, the commission said in a statement yesterday. ZT counts hyperscalers such as Microsoft Corp, Amazon.com Inc and Google among its major clients and plays a minor role in deciding the specifications of data centers, given the strong bargaining power of
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
RSS