The company’s overall revenue declined 4.5% to NT$2.16 trillion last year, analysts point out investors should focus on its leadership, potential shift in US investment strategy and the ability to secure sufficient orders.
Taiwan Semiconductor Manufacturing is scheduled to announce Q4 earnings results before the market opens on Thursday, January 18th.
Latest Results
Its Q3 revenue slipped 10.83% from a year ago to NT$546.73 billion, while net income fell 24.87% from a year ago to NT$211 billion.
Q4 Guidance
The company expects Q4 revenue to come in between $18.8 billion to $19.6 billion.
“Moving into Q4 2023, AI-related demand continues to be strong but it is not enough to offset the overall cyclicality of our business,” said CEO Wei during the Q3 earnings call.
The Company Halts Sales Declines After AI Demand Offsets Chip Malaise
It reported December sales of NT$176.3 billion ($5.7 billion), completing a NT$625.5 billion quarter. That matched earnings from the same period a year earlier, which was among the company’s highest quarterly results. Overall revenue declined 4.5% last year, to NT$2.16 trillion.
While it outdid analyst expectations and its own guidance, its $20.2 billion quarter still fell short of delivering growth. December sales were down 8.4% on the same month a year earlier, offering a mixed outlook for the year ahead.
Meanwhile, the Semiconductor Industry Association pointed out that global semiconductor sales increased on a year-to-year basis in November for the first time since August 2022, and it expects the global semiconductor market is projected to experience double-digit growth in 2024.
2024 May Be a Record Year for Semiconductor Industry
According to the latest report from TechInsights, 2024 is expected to be a record year for global semiconductor industry revenue, with the total market size exceeding the peak in 2022. In addition, TechInsights predicts that the market size is expected to double in the next 10 years, creating more than $1 trillion in revenue.
TechInsights believes that 2023 has been a challenging year for the semiconductor industry, with weakening demand, oversupply, and a troubled global economy leading to a downturn in the industry. Weakened consumer demand for electronics has fundamentally affected the semiconductor industry.
Analyst Opinions
Bloomberg analyst Charles Shum said three things will likely be in focus in the upcoming earnings briefing: the implications of Chairman Mark Liu's retirement for its leadership; a potential shift in US investment strategy amid uncertain government subsidies for new fabs; and the company's ability to secure sufficient orders from chip designers like Qualcomm and MediaTek to sustain N3 node full-load status, particularly if Apple reduces its orders due to weakening iPhone demand.
HSBC analysts Ricky Seo and Hankil Chang said upgrades to AI server farms and on-device AI applications are likely to drive an IT replacement cycle, for US cloud service providers, they expect capex to grow significantly, about 65% in 2024. Additionally, AI server purchases will likely total 57% of their investments in 2024, up from 8% in 2022.
Wedbush has an Outperform rating and a target price of NT$700 for the company. Analysts said the Q4 sales were 2% above their estimate of NT$614.7 billion and consensus at NT$615.6 billion. This result mirrors prior commentary anticipating a strong CQ4 for the company tied to Apple seasonality, continued growth in demand for AI solutions, and better Chinese handset dynamics.
