$Taiwan Semiconductor Manufacturing(TSM)$ $Apple(AAPL)$ $TENCENT(00700)$ Taiwan Semiconductor Manufacturing Co. shares edged toward fresh highs since raising growth projections and unveiling record spending, underscoring expectations the voracious demand that fueled a global chip crunch will persist.
TSMC is now projecting average sales growth of 15% to 20% annually -- as much as double its previous expectation. It intends to spend $40 billion to $44 billion expanding and upgrading capacity in 2022. Those numbers affirm TSMC’s pole position in the market during an unprecedented chip shortage triggered by the pandemic.
They also reflect management’s confidence on leading-edge node chips’ long-term demand strength and possible 15%-plus average annual growth over the next 2-3 years. Yet the spending plan, driven partly by fierce competition with Intel and Samsung for leadership in next-generation chipmaking technology, may weigh on the company’s free cash flow and lead to greater volatility in dividend payouts.
Although an earlier share rally stalled after setting a record high in early 2021，the Taiwanese chipmaker still delivered an annual gain of 16%. Its market capitalization has surged to NT$17.4 trillion ($627 billion), surpassing that of Tencent to make it Asia’s most valuable company.
TSMC's clients, which range from mighty Apple to many of the world's global automakers, will be happy to hear that the company plans another year of massive capacity upgrades. Judging from the price action, its investors are already pleased.
TSMC is “well-positioned” in the industry and has room for further price increases in the years to come. Therefore, do not rush to sell！
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