Slower global economic growth and US export restrictions would dent revenue at Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) over the next 12 to 18 months, Moody’s Investors Service said in its latest report.
“We expect revenue at TSMC to fall by 1 percent after its robust growth of around 40 percent in 2022,” it said, adding that earnings would also slip from a high comparison base.
Nevertheless, strong net cash positions and good access to funding would enable the company to weather the short-term challenges, Moody’s said.
Photo: Hung You-fang, Taipei Times
Slowing global growth, coupled with high interest rates and inflation, is reducing chip demand, especially for consumer electronics and smartphones, it said.
Chip inventory corrections due to stockpiling during the COVID-19 pandemic are also curbing order inflows, it added.
US export restrictions that limit China’s ability to obtain or build advanced computer chips would take a gradual toll, eating into TSMC’s revenue and earnings growth potential, but the effects are expected to be limited, as TSMC has a one-year exemption, Moody’s said.
Softening consumer demand would reduce capacity utilization, weighing on adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margins, a key profitability measure, it said.
SPENDING
In the face of the new trade hurdles, TSMC needs to continue spending heavily to develop next-generation technologies and increase capacity so that it can meet an expected surge in chip demand over the next three years, given accelerating digital transformation and breakthroughs in artificial intelligence-powered applications, Moody’s said.
Yet, new products would weaken margins and hurt profitability in the early stage, while intense competition causes price pressure, it said.
TSMC’s adjusted EBITDA margin would decline to 68.5 to 69.0 percent this year from 70.4 percent last year, it added.
Despite the challenges, TSMC holds a healthy cash balance, exercises stable dividend policies and generates solid cash flows, which would help the company maintain stable credit quality this year, Moody’s said.
Last year was a bumper earnings year for TSMC and other independent foundry service providers, it said, adding that TSMC derived more than 90 percent of its revenue from semiconductor foundry services.
TSMC shares fell 1.58 percent to NT$559 in Taipei trading yesterday, Taiwan Stock Exchange data showed.
Semiconductor business between Taiwan and the US is a “win-win” model for both sides given the high level of complementarity, the government said yesterday responding to tariff threats from US President Donald Trump. Home to the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), Taiwan is a key link in the global technology supply chain for companies such as Apple Inc and Nvidia Corp. Trump said on Monday he plans to impose tariffs on imported chips, pharmaceuticals and steel in an effort to get the producers to make them in the US. “Taiwan and the US semiconductor and other technology industries
SMALL AND EFFICIENT: The Chinese AI app’s initial success has spurred worries in the US that its tech giants’ massive AI spending needs re-evaluation, a market strategist said Chinese artificial intelligence (AI) start-up DeepSeek’s (深度求索) eponymous AI assistant rocketed to the top of Apple Inc’s iPhone download charts, stirring doubts in Silicon Valley about the strength of the US’ technological dominance. The app’s underlying AI model is widely seen as competitive with OpenAI and Meta Platforms Inc’s latest. Its claim that it cost much less to train and develop triggered share moves across Asia’s supply chain. Chinese tech firms linked to DeepSeek, such as Iflytek Co (科大訊飛), surged yesterday, while chipmaking tool makers like Advantest Corp slumped on the potential threat to demand for Nvidia Corp’s AI accelerators. US stock
The US Federal Reserve is expected to announce a pause in rate cuts on Wednesday, as policymakers look to continue tackling inflation under close and vocal scrutiny from US President Donald Trump. The Fed cut its key lending rate by a full percentage point in the final four months of last year and indicated it would move more cautiously going forward amid an uptick in inflation away from its long-term target of 2 percent. “I think they will do nothing, and I think they should do nothing,” Federal Reserve Bank of St Louis former president Jim Bullard said. “I think the
SUBSIDIES: The nominee for commerce secretary indicated the Trump administration wants to put its stamp on the plan, but not unravel it entirely US President Donald Trump’s pick to lead the agency in charge of a US$52 billion semiconductor subsidy program declined to give it unqualified support, raising questions about the disbursement of funds to companies like Intel Corp and Taiwan Semiconductor Manufacturing Co (台積電). “I can’t say that I can honor something I haven’t read,” Howard Lutnick, Trump’s nominee for commerce secretary, said of the binding CHIPS and Science Act awards in a confirmation hearing on Wednesday. “To the extent monies have been disbursed, I would commit to rigorously enforcing documents that have been signed by those companies to make sure we get
RSS