TSMC Share Price Boosted By Goldman Even As Report Worries About Order Cut

Ramish Zafar

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

The Taiwan Semiconductor Manufacturing Company (TSMC) is witnessing a fresh wave of enthusiasm from investment banks despite a report from the Taiwanese publication DigiTimes that claimed earlier today that the fab's customers of its next-generation chip manufacturing technology have cut down on their orders. Goldman Sachs and Citi were out with bullish reports for TSMC, with the former increasing TSMC's share price target and both believing in revenue growth for the world's largest contract chip manufacturer next year.

TSMC Share Price Target Raised To NT$780 By Goldman Sachs In Fresh Note

According to the United Daily News (UDN), both Goldman Sachs and Citi are optimistic about TSMC's future. The semiconductor industry has faced some headwinds this year, as worries persist of an inventory correction leading to reduced orders for chipmakers such as TSMC. For the Taiwanese fab in particular, rumors of Intel corporation delaying its latest products sparked concerns of a subsequent delay and drop in capital expenditure for the company's 3-nanometer chip process right when TSMC is moving ahead with mass production.

The fresh analyst note from Goldman Sachs outlines that TSMC's revenue for the third quarter, which will end this month, will meet forecasts and expectations despite volatility in the share price. It goes on to add that should the NT$ continue to further depreciate against the U.S. dollar, then TSMC's gross margin will also increase. A weak local currency benefits exporters as it allows them to bring in more of the local unit through their exports that are sold using the stronger currency.

Goldman Sachs continues to state that TSMC will increase its wafer price next year, with the fab's eight and 12-inch wafers expected to see their prices go up by 5% and 4%, respectively. Commenting on the semiconductor inventory correction, the bank goes on to add that the inventory adjustment will pick up in the second half of next year.

Coming towards TSMC's share price target, Goldman increases this to NT$780 from NT$755. The fab's shares closed at NT$435 in Taiwan today and they are down by 31% year to date as global markets continued to be rattled by high inflation and a strong U.S. dollar.

TSMC's shares have slumped by 31% this year in Taiwan.

In a similar note, Citi while reiterating its NT$570 share price target and a Buy rating for TSMC's share, shared details about the firm's capacity utilization, revenue and product demand. The investment bank believes that despite a downturn in the personal computing and mobile industries, TSMC will increase its market share, which in turn will allow the firm to ride out any instability.

It goes on to add that due to the industry downturn, capacity utilization for TSMC's 7-nanometer and 6-nanometer manufacturing processes has dropped, but the utilization for the fab's 4-nanometer and 5-nanometer will remain stable throughout the first quarter of next year due to a flurry of orders from Apple and NVIDIA. The weakness in PC and mobile will be followed by strong orders for 3 nanometer believes Citi, which in turn might allow TSMC to increase its profitability next year. The fab is only one of the two contract chip manufacturers that can manufacture 3-nanometer chips, and its latest products are believed to head towards Apple's new products.

Finally, in terms of revenue, TSMC's fourth quarter results will be sequentially flat due to a drop in orders, and the revenue will recover in the second quarter of next year the company ships its 3-nanometer products.

These reports come as the Taiwanese publication DigiTimes reported earlier today that TSMC's "major fabless customers" have started to reduce their wafer starts for 2023, which DigiTimes fears will result in the company revising its sales outlook in January next year. A wafer start in the chip industry refers to the manufacturing process starting for a production quality wafer.

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