TSMC Can Earn $100 Billion Revenue In 2025, Letting It To Catch Up To Intel

Ramish Zafar
Water tankers exit TSMC's fab in Taiwan as it navigated a historic drought and chip demand last year. Image: CNA

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The Taiwan Semiconductor Manufacturing Company (TSMC) will cross the $100 billion revenue mark in 2025, believes investment bank JPMorgan Chase, according to a report from Taiwan. The bank's prediction follows an earlier one from Citigroup, which is even more optimistic for the company, a fact evident in its belief that TSMC's revenue will cross the $100 billion mark a year earlier in 2024. This optimism follows recently reported price increases by the company, as it looks to beef up its gross margins and fund capital expenditures in a growing industry.

TSMC's Revenue Growth To Touch 17% Over Next Five Years Due To Price Increases And High Performance Computing (HPC) Demand

Reports from Taiwan which surfaced last month, outlined that TSMC had increased its prices for all chip manufacturing process technologies. This reported increase focused primarily on the company's older technologies, with transistor sizes starting and increasing from 16/20 nanometers (nm).

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Investment firms welcomed the news, who outlined that the increase will help bolster TSMC's gross margins and might even let the company surpass Intel Corporation in this crucial metric. Gross margins measure the efficiency of a company's direct manufacturing or production costs, and higher margins imply that it is earning more from every production dollar spent.

JPMorgan's analysis, which comes courtesy of the United Daily News (UDN), lists down four factors for its belief that TSMC stands to earn $100 billion in 2025. The first of these is strong demand for high performance computing (HPC) platforms which, according to the bank, are facing stronger than expected demand and will therefore increase their percentage in the company's revenue pie.

Secondly, it believes that TSMC is in a commanding position for smartphones, with its market share set to grow in the coming years. TSMC's packaging technologies and its strong wafer ecosystem are the final two reasons behind JPMorgan's analysis, with the former involving 2.5 and 3D technologies and the latter providing the chipmaker with stronger bargaining power.

Even though TSMC's revenue grew by 20% annually in the second quarter of 2021, its direct manufacturing costs grew by 30% during the same period annually, highlighting the complexities of manufacturing leading-edge processors. All items in thousands of NT$.

The bank also believes that for HPC products, TSMC's revenue is set to grow at a staggering compound annual growth rate (CAGR) of 30% from 2020 to 2025. This revenue will stand at $50 billion in 2025, believes JPMorgan, and by 2023, it will surpass smartphone revenue to become the single largest contributor to TSMC's sales.

It also believes that the company's revenue will grow by 18% next year and that the new 3nm process, expected to enter mass production in 2022, will grow the fab's revenue by 23% in 2023. TSMC's 3nm process is thought to be in high demand by big-ticket firms such as Apple Inc and Intel Corporation for their smartphone and personal computing processors.

According to JPMorgan, the CAGR for TSMC's overall revenue growth from 2020 to 2025 will stand at 17%, and the 2023 growth estimate matches the estimate from HSBC.

In a report which surfaced late last month, HSBC had estimated that TSMC stands to grow its revenue by 22% following a 15% average price increase and push its gross margin to at least 53%.

Should TSMC follow JPMorgan and Citigroup's revenue projections, the firm will compete directly with Intel Corporation. The American chip giant earned $78 billion in GAAP-adjusted revenue last year, and during the first six months of this year, it has brought in roughly $40 billion in revenue.

Intel's revenue grew by 8% last year and assuming a 10% average growth from the end of 2020 to 2025 results in the company potentially bringing in $126 billion in 2025. This is a rudimentary, off-the-bat analysis that does not factor in manufacturing process advances from the company.

Still, what it does indicate is the narrowing of a wide revenue gap between the two companies. TSMC earned $46 billion in revenue last year, roughly 60% of what Intel brought in during the same period. Should it bring in $100 billion in 2025, it will have significantly narrowed this gap, with the projected amount being precisely 80% of our rudimentary estimate for Intel.

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