TSMC Posts Better-than-expected Sales, Signaling a Recovery in Semiconductors

Taiwan Semiconductor Manufacturing Co (TSMC) exceeded analysts' expectations on Wednesday, showcasing resilience in the face of declining revenues by delivering stronger-than-anticipated sales in the final quarter of 2023. This performance is indicative of a potential end to the global downturn in the chip market.

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TSMC, renowned for producing microchips utilized in nearly all electronic devices, reported sales of NT$176.3 billion ($5.7 billion) for December 2023, reflecting an 8.4% decrease compared to the same period in 2022. However, the company outperformed expectations for the fourth quarter, recording revenues of NT$625.5 million. Its full-year sales for 2023 amounted to NT$2.16 trillion, representing a 4.5% decline from the previous year.

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Despite a 21% increase in TSMC's shares over the past 12 months, the stock exhibited relatively stable performance on Wednesday.

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A consensus of 27 analysts surveyed by Factset had initially projected TSMC to generate only NT$615.8 million in sales for the fourth quarter of 2023. This outlook was influenced by a global downturn in the semiconductor market, driven by sluggish consumer demand for laptops and mobile phones.

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The company's surpassing of sales expectations suggests a potential turnaround in the global chip market. Notably, global semiconductor sales experienced an upturn in November 2023, rising by 5.3% to reach $45.6 billion—the first increase in over a year—according to data from the World Semiconductor Trade Statistics (WSTS) organization. This positive shift was attributed to a surge in demand for computer chips from the AI industry and Chinese electronics manufacturers stockpiling semiconductors in anticipation of U.S. restrictions on China's access to chips, as reported by Deutsche Bank in December 2023.

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TSMC, with the state-owned National Development Fund of Taiwan as its second-largest shareholder, stands to benefit from any potential AI boom, given the dominance of its high-tech chip-on-wafer-on-substrate (CoWoS) chips. In July 2023, the company outlined plans to invest NT$90 billion in constructing a new advanced chip manufacturing facility in Taiwan, aiming to capitalize on the anticipated growth in the AI sector.

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In conclusion, TSMC's better-than-expected sales in the face of declining revenues reflect a positive signal for the semiconductor market, suggesting a potential end to the recent global downturn. The company's strategic focus on high-tech chip manufacturing positions it favorably to capitalize on emerging opportunities, particularly in the flourishing AI industry.