Chip Stocks Soar To Record After Taiwan Semi Unveils $28BN Spending Blitz

Chip equipment stocks soared on Thursday, and the Philly Semiconductor index surging to a new all-time high, after Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract chipmaker, disclosed massive capital spending plans up to $28 billion into capital spending this year which Bloomberg called "a staggering sum", aimed at expanding its technological lead and constructing a plant in Arizona to serve key American customers.

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The company announced that its capital spending for 2021 would be between $25 billion to $28 billion, compared with $17.2 billion the previous year. About 80% of the outlay will be devoted to advanced processor technologies, suggesting TSMC anticipates a surge in business for cutting-edge chipmaking. One reason for this is that Intel, which on Wednesday announced a new CEO, is said to be contemplating a departure from tradition and outsourcing manufacture to the likes of TSMC.

For the December quarter, the company reported net income of NT$142.8 billion ($5.1 billion), up 23%, and well above expectations of NT$137.2 billion. That contributed to a 50% increase in full-year profit, the speediest rate of expansion since 2010. Sales in the December quarter climbed 14% to a record NT$361.5 billion, according to previously disclosed monthly numbers, helped in part by robust demand for Apple’s new 5G iPhones.

TSMC also expects revenue of $12.7 billion to $13 billion this quarter, well ahead of the $12.4 billion average of analyst estimates. According to Bloomberg calculations, that will power mid-teens sales growth this year, though that’s roughly half the pace of the increase in 2020.

The fourth-quarter results revealed growing contributions from TSMC’s most-advanced 5-nanometer process technology, which is used to make Apple’s A14 chips. That accounted for about 20% of total revenue during the quarter, more than doubling its share from the previous three months, while 7nm represented 29%. By segment, TSMC’s smartphone business contributed about 51% to revenue, while HPC was at 31%.

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