Taiwan Semiconductor's Strategic Moves: AI-Driven Growth, Global Expansion, and Geopolitical Challenges

Taiwan Semiconductor Hits $26.3 Billion Q4 Revenue, Reportedly Ends PowerAIR Deal Over Huawei Chip Breach Amid US Sanctions - Taiwan Semiconductor (NYSE:TSM)

TSM stock surged 105% in 12 months, driven by AI chip production for Nvidia and Apple's smartphone chips. Semiconductor chipmaker Taiwan Semiconductor Manufacturing Co TSM ended collaboration with Singapore's PowerAIR after discovering a Taiwan Semiconductor chip in a Huawei Technologies artificial intelligence processor, SCMP reports. In 2024, the Taiwanese contract chipmaker suspended shipments to China's chip designing firm Sophgo after a chip it ordered from the Taiwanese chipmaker matched with one on Huawei's Ascend 910B multi-chip system. Washington imposed sanctions on Chinese smartphone giant Huawei in 2020, citing national security threats. Also Read: Intel Partners with Amazon Cloud to Drive Next-Gen Smart Vehicle Tech, Wins Stellantis, Karma Auto As Clients The update coincides with reports indicating Nvidia and other chipmakers are susceptible to potential U.S. AI chip sanctions to China. Washington's new curbs could restrict Nvidia's AI chip shipments, with three-tier export rules favoring allies like Taiwan and barring Tier 3 nations like China. Taiwan Semiconductor stock surged over 105% in the last 12 months, gaining prominence by manufacturing AI chips for Nvidia Corp GPUs and chips for Apple Inc smartphones. Taiwan Semiconductor reported consolidated revenue of 2.89 trillion New Taiwan dollars between January and December 2024 (up by 33.9% year-on-year). It reported a consolidated revenue of 2.03 trillion New Taiwan dollars between January and September 2024. Therefore, it implies that the chipmaker reported a consolidated revenue of 868.46 billion New Taiwan dollars ($26.3 billion versus a consensus of $26.2 billion) for the December quarter versus $19.62 billion a year ago. The company expects fourth-quarter revenue of $26.1 billion - $26.9 billion. Taiwan Semiconductor considered China the most significant revenue source after the U.S., as per the SCMP report. The chipmaker expected its China sales to grow by 26% in 2024 to $10.4 billion, accounting for 12% of its total revenue of $88.3 billion, SCMP cites Visible Alpha. Investors can gain exposure to stocks of companies that manufacture semiconductors through the Invesco Semiconductors ETF PSI and ProShares UltraShort Semiconductors SSG. Price Action: TSM stock is up 1.34% at $209.89 premarket at last check Friday. Also Read: Uber, Nvidia Partnership To Unlock Value By Leveraging AI To Advance Ridesharing, Autonomous Tech: Analyst Image via Shutterstock. TSMTaiwan Semiconductor Manufacturing Co Ltd$210.091.43%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewAAPLApple Inc$242.66-0.02%NVDANVIDIA Corp$139.28-0.59%PSIInvesco Semiconductors ETF$61.23-%SSGProShares UltraShort Semiconductors$25.452.83%Market News and Data brought to you by Benzinga APIs

Taiwan Semiconductor Ramps Up Production in Japan, US, and Germany to Diversify Away from China - Taiwan Semiconductor (NYSE:TSM)

AI demand and 2nm advancements drive TSM's 26.8% growth projection for 2025. Taiwan Semiconductor Manufacturing Co TSM is all set for full-capacity production in the U.S. and Germany after commercializing its debut Japanese chip plant in Kikuyo, Kumamoto Prefecture, last December. Nvidia Corp's NVDA $3 trillion valuation and Taiwan Semiconductor's 2nm progress testify to AI-driven chip industry growth. Reportedly, Microsoft Corp MSFT eyes $80 billion in developing AI data centers in fiscal 2025, marking a big win for the sector. Also Read: Taiwan Semiconductor's Kaohsiung Expansion To Boost 2-nm Chip Production The contract chipmaker aims to complete production of plants in Arizona in 2025 and Dresden in 2027. Construction of Taiwan Semiconductor's second Japanese factory will likely begin near the Kikuyo plant, the Japan News reports. Taiwan commanded 67% of the global market share in contracted semiconductor manufacturing and nearly 80% in cutting-edge products in 2023, the Japan News cites TrendForce. Taiwan attempted to shield itself from geopolitical tension by concentrating production on the island. Still, it also remains focused on its geographical diversification to help the world boost its semiconductor base by reducing its dependence on China, whose semiconductor supply chain was disrupted during the 2020 pandemic. Kumamoto Gov. Takashi Kimura shared with Japan Times the country's hopes to attract Taiwan Semiconductor's third plant in the prefecture. The new plant, located in Kikuyo, began commercializing 12-28 nm technology last December. It caters to Sony Group Corp SONY, which produces camera sensors for Apple Inc AAPL. Taiwan Semiconductor is proficient in making general-purpose chips between 12 and 28 nm. However, chip plants in Japan failed to produce semiconductors thinner than 40 nm, prompting them to tap the Taiwanese chipmaker. Taiwan Semiconductor is building a new plant in Arizona, where commercialization of 4-nm chips will likely begin between January and March. It aims to complete its debut European plant in Dresden in 2027. The plant targets a quadrupolar production plan with principal plants in Taiwan, Japan, the U.S., and Germany. Meanwhile, some concerns loom in the form of President-elect Donald Trump taking charge on January 20. The U.S. posted a significant trade deficit with Taiwan in 2023, prompting Trump to verbally attack the country during his presidential campaigns for allegedly depriving the U.S. of the semiconductor industry. He suggested redemption by slapping tariffs on Taiwan, which can increase the contract chipmaker's production costs since labor costs in the U.S. are about 30% higher than in Taiwan. Taiwan Semiconductor stock surged over 115% in the last 12 months. Goldman Sachs' Bruce Lu projected another year of robust revenue growth for Taiwan Semiconductor in 2025E, 26.8%, following 29.4% revenue growth in 2024E (all in USD terms). Demand in leading-edge nodes, mainly supported by AI, backed this growth. Investors can gain exposure to companies that manufacture semiconductors through ProShares UltraShort Semiconductors SSG and ProShares UltraShort Semiconductors XSD. Price Action: TSM stock is up 0.08% to $220.19 premarket at last check Tuesday. Also Read: Nvidia Targets Robotics as Next Big Opportunity Amid Rising AI Rivalry Image via Shutterstock TSMTaiwan Semiconductor Manufacturing Co Ltd$219.92-0.04%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewAAPLApple Inc$242.41-1.06%MSFTMicrosoft Corp$429.190.31%NVDANVIDIA Corp$152.752.22%SONYSony Group Corp$21.151.20%SSGProShares UltraShort Semiconductors$22.14-3.06%XSDSPDR S&P Semiconductor ETF$252.50-4.64%Market News and Data brought to you by Benzinga APIs

TSMC Analyst Sees AI, Advanced Nodes Driving Growth In 2025 - Taiwan Semiconductor (NYSE:TSM)

Taiwan Semiconductor expected to hike prices for 3nm and 5nm nodes in 2025, boosting margins to over 59%. Goldman Sachs analyst Bruce Lu maintained a Buy rating on Taiwan Semiconductor Manufacturing Co TSM with a price target of $254, up from $248. Taiwan Semiconductor will host its fourth-quarter analyst meeting on Jan. 16. Lu expected another year of solid revenue growth in 2025E by 26.8% for Taiwan Semiconductor, following 29.4% revenue growth in 2024E (all in USD terms), driven by strong demand in leading-edge nodes mainly supported by continuous strong momentum from AI. Also Read: AI Chip Stocks Nvidia, Broadcom, AMD, Taiwan Semi, Micron, Super Micro Surge Premarket: Whats Going On? The analyst also noted a more favorable competition landscape, with Samsung Electronics SSNLF foundry and Intel Corp INTC foundry facing more difficulties as they move to more advanced nodes. Therefore, he modeled a mid-high single-digit price hike for 3nm and 5nm nodes and a 10%+ price hike for chip-on-wafer-on-substrate starting in 2025. On the back of higher pricing, Lu now expects Taiwan Semiconductor's gross margin to grow to 59.3% in 2025E versus 56.1% in 2024E. As for first-quarter of 2025E, the analyst now expects a stronger-than-normal seasonality quarter with a 2.2% sequential revenue decline (USD terms) versus an average 5% decline in the past 10 years, with gross margin staying at the same level as the fourth quarter of the 2024E at 58.9% in first-quarter of 2025E. Lu noted the high possibility of Taiwan Semiconductor raising its long-term guidance. He said Taiwan Semiconductor could raise its profitability outlook and long-term revenue CAGR at its upcoming analyst meeting. In Goldman Sachs' Communacopia Conference, held Sept. 9-12, 2024, in San Francisco, Taiwan Semiconductor management guided that its revenue CAGR target of 15%- 20% could also extend to the next 5 years (versus the guided timeline of 2021-2026). Lu noted this will be mainly supported by the continuous strength in leading-edge nodes and AI and HPC segments, the less intensified competition from other leading edge foundries. For profitability, the company is now projecting its long-term gross margin to be "53% and higher," and with the new elevated pricing for 3nm and 5nm nodes and CoWoS commencing in 2025E, noted Taiwan Semiconductor will potentially raise the long-term gross margin target to "mid-50% and higher" range. The analyst expected a higher capex of around $40 billion in 2025E, following a lower spend of around $30 billion in 2024E. However, its capital intensity will remain at the mid-30%s level, which aligns with Taiwan Semiconductor's guidance on capital intensity. Notably, most of the capex spent in 2025 will help expand 2nm and CoWoS. Lu noted ongoing market concerns regarding the potential acceleration of U.S. capacity expansion and the potential acceleration of new node introduction after the U.S. presidential election. Notably, Taiwan Semiconductor plans for the second and third U.S. fab to enter mass production by 2028 and 2030. The analyst sought updated comments from management on their U.S. expansion plans. Lu noted that the industry faces overcapacity for mature nodes and that Taiwan Semiconductor's 7nm node is still underutilized. However, Taiwan Semiconductor plans to expand mature nodes in Japan and Europe, and for its second fab in Japan, Taiwan Semiconductor will also expand 7nm. Lu expects Taiwan Semiconductor to share the strategic considerations behind its decisions to pursue these greenfield capacity expansions despite potential overcapacity. Taiwan Semiconductor aggressively expanded its CoWoS capacity in 2024 and will double its capacity again in 2025. The current end demand is highly concentrated in AI. Lu sought Taiwan Semiconductor's view on potential new applications beyond AI, such as PCs or smartphones that will also adopt the CoWoS technology. Lu tweaked his 2024E EPS estimate by 0.2% to factor in lower revenue from some mainland China customers, as Taiwan Semiconductor is taking a more conservative approach toward its shipment to mainland China customers. The analyst revised 2025E and 2026E EPS by 4.3% and 2.6%, mainly to factor in a stronger seasonality in the first quarter of 2025, driven by strong demand from AI and HPC. Price Action: TSM stock is up 5.8% to $220.76 at last check Monday. Also Read: Cloudflare's AI Innovations And Sales Strategy Drive Goldman Sachs Upgrade Photo: Shutterstock TSMTaiwan Semiconductor Manufacturing Co Ltd$220.955.92%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewINTCIntel Corp$20.32-1.14%SSNLFSamsung Electronics Co Ltd$42.48-13.8%Market News and Data brought to you by Benzinga APIs