BREAKINGVIEWS-AI bull case gets its biggest booster
TSMC CEO CC Wei announced a significant increase in capital expenditure by up to 37% to $56 billion, driven by confirmed semiconductor demand from major clients like Google. The company reported a 20.5% revenue increase to T$1.1 trillion for Q4 2022, with earnings rising 35%. Additionally, a new U.S.-Taiwan trade deal will lower tariffs on Taiwanese exports and incentivize local chipmakers to invest $250 billion in U.S. semiconductor production, with Taiwan providing an additional $250 billion in credit for further investments.
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Robyn Mak
HONG KONG, Jan 16 (Reuters Breakingviews) - TSMC CEO CC Wei says he’s confirmed semiconductor demand with his customers’ customers – cloud giants like Google. Now he’s raising the $1.4 trln chipmaker’s capex by up to 37%, to $56 bln. The splurge from a firm famed for financial discipline will fuel the AI hype for longer.
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CONTEXT NEWS Taiwan Semiconductor Manufacturing (TSMC) on January 15 reported revenue of T$1.1 trillion ($33.2 billion) in the three months to the end of December, an increase of 20.5% from the same period the previous year. Earnings rose 35% to T$505.7 billion. TSMC forecasts 2026 revenue would rise by nearly 30% in U.S. dollar terms and expects capital expenditure to be between $52 billion and $56 billion for the year.
Separately, the U.S. and Taiwan agreed on a trade deal on January 16 that lowers tariffs on the island’s exports to the U.S. to 15% from the current 20%. Taiwanese chipmakers that expand U.S. production will be charged a lower levy on semiconductors or related manufacturing equipment and products they import into the U.S. and can import some duty-free. In exchange, Taiwanese companies will invest $250 billion to increase production of semiconductors, energy and artificial intelligence in the United States. Taiwan will also guarantee an additional $250 billion in credit to facilitate further investment. (Editing by Antony Currie; Production by Ujjaini Dutta)
