TSMC (TSM:NYE), the leading semiconductor manufacturer, has announced its plans to raise prices for advanced process manufacturing in the coming year. With the goal of driving profits and offsetting rising electricity and capital expenditure costs, TSMC aims to maintain its competitive edge in the industry.
This strategic move, alongside their recent capital expenditure forecast, indicates the company’s proactive approach to navigating the challenges faced by the semiconductor market. In this article, we delve into the details of TSMC’s price hike plans, their capex projection, and the potential impact on key customers.
Price Hike to Drive Profits:
Starting in January 2024, TSMC intends to implement a price hike ranging from 3% to 6% for its advanced process manufacturing. This move is aimed at enhancing the company’s profitability and addressing the mounting costs associated with electricity and capital expenditures. By adjusting prices for advanced process output, TSMC seeks to maintain a balance between cost management and meeting customer demands. Factors such as the production process method, order size, and factory location will be taken into consideration when determining the specific percentage of price increases.
Impact on Key Customers:
Notable technology giants like Apple (AAPL:NSD), Nvidia (NVDA:NSD), and Broadcom (AVGO:NSD) are among the key customers expected to be directly affected by the increased costs resulting from TSMC’s price hike. While these adjustments may pose challenges for customers, TSMC’s dominant position in the semiconductor market and its track record of delivering advanced processors instill confidence in its ability to navigate these changes.
Capex Forecast:
During TSMC’s recent annual general meeting, the company provided insights into its capital expenditure (capex) plans. TSMC expects its capex for 2023 to lean toward the lower end of the projected range, which spans from $32 billion to $36 billion. This cautious approach reflects the company’s focus on optimizing investment allocation amidst evolving market dynamics and potential fluctuations in semiconductor demand. TSMC’s strategic capex management positions the company to adapt to market conditions while maintaining financial stability.
Industry Outlook and Performance:
Despite a projected decline of 10% in revenue for the first half of 2023, TSMC remains optimistic about its market performance in the second half of the year. The company anticipates an improvement in semiconductor demand and expects to benefit from the recovery of the Chinese market post-pandemic. TSMC’s robust market presence, particularly in advanced processors, coupled with its ongoing expansion efforts through new global factories, strengthens its position as a leading player in the semiconductor industry.
Is TSM Stock a Good Investment?
Analysts hold a “Strong Buy” consensus rating for the TSM stock forecast, reflecting the company’s strong foothold in the semiconductor market. Needham analyst Charles Shi stands out as a profitable analyst for TSMC, with his Buy rating reaffirmed recently.
Investors considering TSMC stock may find value in tracking his recommendations, as historical data indicates potential profit generation with an average return of 10.91% per trade.
