The Taiwan Semiconductor Manufacturing Company (TSMC) can increase its capital expenditure to $37 billion in 2025 according to a fresh report from investment bank UBS quoted in the Taiwanese press. UBS adds that TSMC's spending for 2024 could sit at the high end of its guidance, i.e. $32 billion, as the firm takes an aggressive approach to deploy 2-nanometer chip technologies ahead of schedule. UBS believes that TSMC is seeing strong demand from Apple for the next generation iPhone and its 3-nanometer products, which can allow it to post a 13% annual revenue growth in this year's third quarter.
TSMC Is Spending Aggressively To Beef Up 2-nanometer Chip Manufacturing Suggests Report
According to the details, UBS is quite optimistic about the impact of AI on the semiconductor cycle. The chip industry is highly cyclical, with manufacturers deciding capacity based on order projections and firms either falling short, meeting or exceeding this demand. After firms such as AMD and Intel have finished upgrading their products, fabs like TSMC take a breather and wait for the next generation of technologies.
UBS believes that courtesy of AI, TSMC's earnings per share for 2024 to 2028 will sit at NT$40.14, NT$53.27, NT$60.75, NT$69.5, and NT$80.23, respectively. AI and high performance computing should also help TSMC with its gross margins, and the firm is also beefing up its capacity for packaging. The latest bit suggests that by the end of this year, TSMC's CoWoS packaging capacity will sit at 40,000 wafers per month by 2024 end and grow to 55,000 wafers per month by the end of next year.
On the capital expenditure front, UBS is quoted to have estimated that expenditure for this year will sit at the high of TSMC's guidance. The guidance currently ranges between $28 billion to $32 billion. For 2025, today's report suggests that the spending could sit at $37 billion.
The report also suggests that TSMC's capital expenditure is being driven by its investments in 2-nanometer chip production. While TSMC is slated to start 2-nanometer mass production next year, estimates suggest that the firm is ahead of schedule when it comes to deploying equipment. This builds on earlier rumors that have shared that TSMC might expand 2-nanometer production to facilities spread out all over Taiwan.
TSMC's EPS growth, as highlighted above, will also be driven by strong demand for its current manufacturing technologies. UBS believes that the firm's N3 and N5 technologies, which cover the 3-nanometer and 5-nanometer process technologies, will continue to see strong demand during the second half of 2024. Apart from Apple's next generation smartphone lineup that usually launches in September, Qualcomm and MediaTek will also account for some of these orders.
Potential strong demand for Apple's smartphones might also mean that TSMC's capacity for 3-nanometer remains stretched in 2024 and in 2025. TSMC, like other chip companies, has seen its revenue soar after a year long crunch in the wake of the coronavirus pandemic. A.I. orders, particularly those from NVIDIA have helped the firm, and its American Depository Receipts (ADRs) are up by 71% year to date.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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