Taiwan Semiconductor Manufacturing (TSM), the world’s largest independent chip producer, expects revenue to grow about 30% in 2022. Sales growth this year should accelerate from 2021’s 24.9% (in dollar terms), Chairman Mark Liu said at the company’s annual shareholder meeting on Wednesday, June 8. That’s a bump higher on company guidance in April of growth topping mid- to high-20% in 2022.
“The current inflation has no direct impact on the semiconductor industry as the demand drop is mainly for consumer devices like smartphones and PCs while EV [electric vehicle] demand is very strong and partially exceeds our supply capacity so we are making inventory adjustments,” Liu said. “Utilization rate is full for the rest of the year.”
Taiwan Semiconductor reaffirmed previous projections for $17.6 billion to $18.2 billion of revenue this quarter, supporting gross margins of as much as 58%.
However…
This week China’s Guancha website posted a speech from last month in which a senior Chinese economist at a government-run research group called on authorities to seize Taiwan Semiconductor Manufacturing if the U.S. hits China with sanctions like those leveled against Russia.
“If the US and the West impose destructive sanctions on China like sanctions against Russia, we must recover Taiwan,” said Chen Wenling, chief economist at the China Center for International Economic Exchanges. The research group is overseen by the National Development and Reform Commission, China’s top economic planning agency. “Especially in the reconstruction of the industrial chain and supply chain, we must seize TSMC,” Chen said in a speech last month hosted by the Chongyang Institute for Financial Studies at Renmin University.
“They are speeding up the transfer to the U.S. to build six factories there,” she added. “We must not let all the goals of the transfer be achieved.”
Taiwan Semiconductor is currently building a $12 billion plant in Arizona and the company has earmarked $40 billion to $44 billion this year to expand in the United States and other markets and upgrade its facilities and should again spend more than $40 billion in 2023.
The company’s shares barely stumbled Tuesday and Wednesday on the release of the speech. Some of that is that the remarks are from a relatively low profile Chinese official. While they call out Taiwan Semiconductor in a more prominent way, they certainly don’t represent anything new in China’s Taiwan policy. And part of the lack of reaction is likely to be a realization that if China were to invade Taiwan, the damage to global financial markets would far exceed a plunge in the shares of one company.
Taiwan Semiconductor has been a member of my long-term 50 Stocks Portfolio since October 7, 2019. The shares are up 95.6% as of the close on June 7. I recently added the stock to my Millennial Portfolio (for investors with more time than money.) That position is down 1.6% since June 1, 2022.
