Since the news of price increases last month, TSMC has experienced a strong surge in the stock market.
On July 8th, when the US stock market opened for trading, TSMC's stock price rose by 4.8% and its market value exceeded $1 trillion for the first time. Later, it fell again, with the stock price closing up 1.45% and the market value ultimately remaining at $968.1 billion.
Although it failed to fully reach the trillion dollar mark, this is TSMC's best performance in history since its listing. Since the beginning of this year, TSMC's stock price has risen by over 80%, and in the past two months, it has risen by over 28%.
Compared to the unprecedented enthusiasm in the market for TSMC, TSMC's previous forecast for this year's semiconductor market appeared relatively "calm" - although the explosion of AI has stimulated the "endless" demand for high-performance computing chips in data centers. However, the demand for electronic consumer goods such as smartphones and computers is still insufficient, and the automotive industry has experienced an unexpected decline. The entire semiconductor industry cycle remains relatively weak.
TSMC CEO Wei Zhejia believes that 2024 is a year for the industry to return to healthy growth, and the semiconductor industry's prosperity will bottom out in the second quarter and recover in the second half of the year. The output value of the semiconductor industry may decrease for the whole year of 2024, and TSMC is expected to achieve a slight growth.
If TSMC is not included, there are already seven listed companies in the US stock market with a market value exceeding $1 trillion so far this year, namely Microsoft, Apple, Nvidia, Google, Amazon, Saudi Aramco, and Meta. TSMC is currently the world's eighth largest company by market value, surpassing Buffett's Berkshire Hathaway ($880.1 billion) and pharmaceutical giant Eli Lilly ($872.3 billion).
But both peers and Wall Street unanimously believe that TSMC has been "underestimated".
At the Taipei Computer Show held in June this year, NVIDIA CEO Huang Renxun talked about TSMC at an investor luncheon, stating that considering TSMC's contribution to the world and the technology industry, the financial report shows that they are "wronged". When Morgan Stanley asked him how he viewed TSMC's plan to raise prices for its products and services, Huang Renxun did not hesitate to support it and said that Nvidia's previous prices were "too low".
With the support of its most important partners, TSMC announced a price increase for its products at the end of June. This price increase mainly targets 3 nanometer and 5 nanometer process technology products, with 3 nanometer and 5 nanometer AI products increasing by 5% -10%, non AI products increasing by 0% -5%, and advanced packaging prices expected to increase by 15% -20%.
As the world's most important chip foundry, with over 60% of the market share, even with price increases, TSMC's order list still has a long queue of customers. According to Taiwan's Economic Daily, four major manufacturers including Apple, Qualcomm, Nvidia, and AMD have heavily contracted TSMC's 3-nanometer process capacity, with orders even scheduled until 2026.
According to a report from Macquarie Securities, most of TSMC's customers have agreed to raise contract manufacturing prices in exchange for reliable supply. With the help of price increases, TSMC's gross profit margin is expected to further climb.
According to TSMC's financial report, the company's annual gross profit margin for 2023 was 54.4%, a decrease of 5.2 percentage points compared to 2022. In the first quarter of 2024, the gross profit margin further declined to 53.1%. It is reported that the main reason for the decline in gross profit margin is the overall decrease in capacity utilization and the impact of 3-nanometer capacity growth.
The market unanimously believes that 2024 is the year of popularization for 3 nanometers. At present, except for the iPhone 15 flagship phone released by Apple in the second half of 2023, which already uses a 3-nanometer chip, Qualcomm and MediaTek in the Android camp have been releasing 3-nanometer flagship phone processors since the first half of 2024. Due to repeated reports of yield issues with Samsung's 3-nanometer solution, TSMC is currently the "only choice" for 3-nanometer chips on the market.
In addition to the impact of price increases, TSMC expects its overall revenue to grow by around 20% in 2024, and its long-term gross profit margin target to remain at 53% or above.
Currently, 70% of TSMC's revenue comes from advanced process chips below 16 nanometers, with 3 nanometers accounting for approximately 6% last year, 5 nanometers and 7 nanometers contributing 33% and 19% respectively. Another 20% come from mature process chips with a diameter of over 28 nanometers. As the company is promoting advanced process technology in the field of 3 nanometers and striving for 2 nanometers, the proportion of revenue from advanced process chips will continue to increase in the future.
After the official announcement of price increases, Wall Street investment institutions such as Goldman Sachs and JPMorgan Chase have recently expressed optimism about TSMC's prospects for this year. Goldman Sachs has raised TSMC's target price by 19%, and it is expected that the manufacturing prices of the company's 3-nanometer and 5-nanometer chips will increase by a "low single digit percentage"; Morgan Stanley and Citibank have both raised TSMC's target price; JPMorgan Chase predicts that TSMC may increase its revenue outlook for 2024.
In 2023, TSMC's revenue was NT $2.16 trillion (approximately RMB 483.3 billion), a decrease of 4.5% compared to the previous year. The company predicts that the annual revenue growth in 2024 will be between 20% -25%.
At the shareholder meeting held in June, Liu Deyin, former chairman of TSMC, officially announced his retirement and resignation, with TSMC CEO Wei Zhejia concurrently serving as chairman. TSMC has officially bid farewell to the era of "dual leadership" established by Zhang Zhongmou when he retired in 2018. As the game between China and the United States has become a core issue affecting the global chip supply chain, Wei Zhejia revealed that global geopolitical changes will be his top priority after assuming the position of Chairman of TSMC.