TSMC on Track for $100 Billion Sales Milestone in 2025: Analyst

TSMC's management displayed a notably cautious approach, acknowledging that their initial projections for a correction in semiconductor industry inventory were overly optimistic. Such a correction typically spurs TSMC's clients to increase orders for silicon wafers to meet rising demand. However, due to the current market glut, orders have remained subdued.

Introduction

The semiconductor market has faced a period of sluggishness, impacting companies like Taiwan Semiconductor Manufacturing Company (TSMC). TSMC, a key player in the industry, witnessed a downturn, prompting adjustments to its financial projections. However, analysts, including Pierre Ferragu from New Street Research, believe that TSMC is poised for a bright future. This post delves into the recent developments, market challenges, and the potential trajectory that could lead TSMC to achieve a remarkable $100 billion in Sales by 2025.

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Current Market Landscape

The semiconductor market has faced challenges, characterized by declining demand for smartphones, personal computers, and consumer electronics. This has directly affected companies like TSMC, prompting them to revise their annual revenue projections for the year 2023. TSMC, a key player in the industry, has experienced a slowdown in orders, and this has necessitated adjustments to their financial outlook.

TSMC Projections of Sales of $100 billion sales in 2025

During their recent earnings call, TSMC’s management displayed a notably cautious approach, acknowledging that their initial projections for a correction in semiconductor industry inventory were overly optimistic. Such a correction typically spurs TSMC’s clients to increase orders for silicon wafers to meet rising demand. However, due to the current market glut, orders have remained subdued. This situation has led to higher capital expenditure for TSMC, as their production machinery isn’t operating at full capacity.

TSMC anticipates a 10% decrease in their full-year revenue for 2023, with an estimated figure of approximately $68.31 billion. Pierre Ferragu concurs with this prediction, forecasting TSMC’s net sales to reach $68 billion during 2023. This forecast aligns with the evident slowdown in the consumer-oriented segment of the semiconductor industry, as evidenced by the financial reports of industry players like NVIDIA and AMD. The deceleration in demand for devices like smartphones and personal computers has directly impacted TSMC’s shipment volumes of wafers.

Image Credits: TSMC

Analyst Insights and Future Projections

Despite the short-term challenges, analysts like Pierre Ferragu hold a positive outlook for TSMC. Ferragu reiterates a “buy” rating for TSMC and sets a target price of 700 yuan, emphasizing a bright future for the company. He envisions a turnaround in the semiconductor sector in 2024 and anticipates that 2025 will be a bumper year for TSMC, with revenue potentially reaching $100 billion for the first time in the company’s history.

TSMC holds a unique advantage as one of only two companies globally that facilitate chip designers in scaling up production using advanced manufacturing technologies.

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Factors Driving Future Growth

  • Analysts foresee a rebound in demand for smartphones, personal computers, and consumer electronics, driving TSMC’s revenue growth.
  • The anticipated recovery is poised to alleviate the recent years’ slowdown.
  • Enterprise computing chips are expected to significantly contribute to TSMC’s revenue growth as they continuously expand to power data centers and other critical infrastructure. The increasing reliance on advanced technologies will fuel demand for these chips.
  • Being among its major customers, industry giants such as Apple, Qualcomm, AMD, and Nvidia are expected to drive growth for TSMC. TSMC’s revenue greatly depends on the strength of its relationships and partnerships with these key players.

Conclusion

While the semiconductor market currently grapples with challenges, TSMC remains well-positioned to navigate through this phase and emerge stronger. The revised revenue projections for 2023 reflect short-term challenges, but analysts foresee a promising future. Expectations are for a rebound in consumer electronics demand. TSMC foresees growth in enterprise computing chips. This surge could drive revenue to hit $100 billion by 2025.. The company’s strategic positioning and strong customer relationships are key factors that bode well for its future growth and success.

Editorial Team
Editorial Team
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