<News Alert> 4Q23 revenue inline; growth resumes in 2024 driven by end-market recovery
- TSM’s 4Q23 revenue flat at NT$625.5bn (US$20.1bn) y-o-y, slightly above forecasts due to strong AI and recovery of smartphone market.
- Anticipate revenue to resume growth in 2024, fueled by consumer electronics demand and its competitive edge in advanced chip manufacturing capabilities.
- TSM, unique in 3nm chip production, targets 2nm mass production in 2025, reinforcing its dominant position in advanced foundry. Maintain BUY with TP of TWD643.6 (US$10.0/ADR)
4Q23 revenue flat y-o-y, slightly above
TSM’s net revenue in Dec 2023 fell 8.4% y-o-y to NT$176.3bn (US$31bn). Its 4Q23 revenue was NT$625.5bn (US$20.1bn), flat y-o-y, but slightly ahead of management’s guidance, which ranged from US$18.8bn to US$19.6bn, and surpassed the market consensus of US$19.76bn. The better-than-expected performance was mainly attributed to the boom in AI applications and the increasing penetration of 3nm System on Chip (SoC), driven by the recent launch of new flagship smartphones. TSM is scheduled to report its detailed 4Q23 earnings on Jan 18.
Riding on the consumer electronics end-market recovery in 2024
We expect the revenue decline to continue to narrow in 1Q24 and anticipate a year-over-year growth in 2024. This growth is expected to be primarily driven by the recovery in demand from consumer electronics end-markets, such as smartphones and PCs. Additionally, the increasing penetration of AI applications and XR devices is expected to continuously support the demand for advanced logic node foundry services in 2024. Currently, TSM is the only foundry capable of mass producing 3nm chips. With TSM’s plans to commence 2nm mass production in 2025, we expect it to maintain its leadership in global chip manufacturing and capitalize on the semiconductor industry’s recovery over the next two years. We expect TSM’s dominant position in advanced foundry technology (5nm or below) to sustain its valuation premium over competitors. We maintain our BUY recommendation for TSM, setting a target price of TWD643.6 (US$10.0/ADR).