[Hong Kong 13th Reuters BREAKINGVIEWS]–The world’s largest and most important semiconductor maker is peeping at its market power. TSMC, a contract manufacturer of semiconductors, is moving to raise prices in response to the global shortage of semiconductors against the backdrop of the rapid expansion of demand for electronic products.
Despite TSMC’s increased investment to maintain significant technological advancement in the industry, profits will grow due to strong customer inquiries and price increases.
The supply chain disruption has brought a large backlog to TSMC and its peers. Due to the increase in prepaid methods and the factory’s full operation, TSMC’s dollar-based sales in the fourth quarter of last year increased by about 25% year-on-year to $ 15.7 billion. Reached. And profits were pushed up to $ 6 billion.
Shareholders are likely to get more shares. Based on JP Morgan’s estimates, TSMC’s silicon wafer purchase costs will rise by an average of 19% for customers such as Apple and Qualcomm from this year. This rate of increase is almost double that of last year, and more than triple that of 2020.
Small and medium-sized semiconductor manufacturers have already been moving to raise prices by taking advantage of supply shortages, but TSMC has also taken advantage of this situation for the first time in earnest to increase profits. As a result, sales forecast for this year is up to $ 17.2 billion in the first quarter, when business performance is normally sluggish, which is about 33% higher than the same period of the previous year. Of particular note is management’s assumption that the gross profit margin will be up to 55%, a record high for the company.
It shows how strong the pricing power of TSMC is, thanks to its established technological advantage over rivals such as Samsung Electronics. The company, which boasts the largest market capitalization as a listed company in Asia, manufactures almost all of the world’s most advanced semiconductors that power iPhones, data center servers, and automobiles.
It seems timely that TSMC has now embarked on expanding its earnings base. The company is in the midst of ambitious business expansion and plans to invest $ 100 billion over the next few years. In addition to proceeding with the construction of a factory in Japan, discussions are underway for construction in the United States, and there is a possibility of establishing a base in Europe.
The estimated capital investment this year is up to $ 44 billion, up from last year’s $ 30 billion. If we raise the price and get some “fruit” from the current business environment, which is experiencing an unexpected tailwind, we will be able to invest with solid confidence.
● Background news
* Taiwan Stacked Circuit Manufacturing (TSMC), the world’s largest semiconductor contract manufacturer, announced on the 13th that sales in the fourth quarter of 2021 were NT $ 438 billion ($ 15.85 billion), 21. Increased by 2%. Profit reached a record high of NT $ 166 billion, up 16.4%.
* TSMC forecasts sales of $ 16.6-17.2 billion in the first quarter of this year. Full-year capital investment is expected to be $ 40 billion-44 billion.
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