TSMC Anticipates Limited Revenue Growth Despite AI Surge, Remains Optimistic

TSMC Chairman Mark Liu stated on June 6th that Jensen Huang, Chairman of NVIDIA, has sparked an AI frenzy during his visit to Taiwan for the computer exhibition. This has indeed provided significant motivation for the increased application of AI, resulting in a rise in TSMC's orders. However, due to an extended period of semiconductor inventory adjustments and ongoing global uncertainties, TSMC's revenue growth for this year is expected to be limited. The capital expenditure plan initially proposed by TSMC at $32 billion to $36.9 billion for this year will tend to approach the lower edge of $32 billion.

During the shareholders' meeting, Liu mentioned that the production of AI-related chips is primarily focused on servers, which has indeed contributed to the increase in TSMC's orders. However, the proportion of these orders in TSMC's overall revenue is small, and the company is still expected to experience negative revenue growth this year, similar to what was previously discussed in the investor conference.

TSMC President C.C. Wei, while reporting on the company's operational status, mentioned that TSMC's revenue for the current quarter is expected to range between $15.2 billion and $16 billion, representing a quarterly decline of 6.7%. The gross margin is estimated to be between 52% and 54%. The semiconductor industry (excluding storage) is projected to decline by 4% to 6%, while the wafer fabrication industry is expected to decline by 7% to 9%. TSMC's full-year revenue is anticipated to decline by a single-digit percentage (between -4% and -6%). The revenue for the first half of this year is expected to be 10% lower than the same period last year. The overall semiconductor market is showing a gradual recovery, and the performance cycle is expected to surpass its low point after the second quarter. The business outlook for the second half of this year is more positive compared to the first half.

Liu emphasized that although AI chip production has not yet brought significant revenue contributions to TSMC, its future development is promising. He stressed that AI applications will not only drive the growth of the server industry but also be adopted in smartphones, PCs, IoT devices, and automotive applications. Most of these chips will be manufactured using advanced processes, which aligns perfectly with TSMC's strengths. Therefore, the future prospects for TSMC are highly promising.

Regarding TSMC's decision to increase its quarterly dividend from 2.75 New Taiwan Dollars to 3 New Taiwan Dollars per share, which was approved during the May board meeting, Vice President and CFO Wendell Huang noted the interdependence between dividends and capital expenditures. TSMC's dividend policy is focused on sustainability and stability, gradually increasing dividends when capital expenditure is significant, and emphasizing continuity and stability. As capital becomes more stable, the dividend is expected to gradually increase.