TSM stock forecast: chip giant processes strong demand

Taiwan Semiconductor saw North America as key revenue driver amid the chip shortage

As the global chip shortage continues, Taiwan Semiconductor Manufacturing Company (TSMC) released its Q3 results this week with revenue up at $14.88bn (£10.81bn). The chip giant reached analyst predictions as demand grows strong in North America, with smartphones driving in the highest revenue.

TSMC was founded in 1987 and is the largest contract chipmaker. With its operations spanning North America, Asia and Europe, it manufactures more than 11,000 products and is a key supplier to Apple. TSMC was also the first to produce 5 nanometre (nm) technologies, which is currently the most advanced semiconductor available.

The shortage of chips was caused by many factors, one of which was high demand during the pandemic. According to Reuters, in an earnings call TSMC announced a new factory in Japan would focus on older chipmaking technology that was now seeing higher demand. The factory will not start producing until 2024, however. But how is its current setup managing with the shortage?

Strong Q3 results

Revenue reached $14.88bn for the semiconductor company, a 22% increase compared with the same period last year and 12% higher than Q2. It also reached analysts’ expectations as Nasdaq reported TSMC’s revenue was expected to be at $14.9bn and Seeking Alpha forecasted $14.74bn. Earnings per share (EPS) were predicted to be at $1.03 by Nasdaq, which TSMC surpassed hitting $1.08.

Wendell Huang, vice president and chief financial officer of TSMC, said: “Our third quarter business was mainly supported by strong demand across all four growth platforms, which are smartphone, HPC [high-performance computing], IoT [internet of things] and automotive-related applications.”

When looking at the demand in their products, the 5nm and 7nm chips stood out. 34% of revenue came from the 7nm chip, 1% lower compared to Q3 in 2020, and 18% came from the 5nm chip, which was 10% higher compared to last year. Both are used for smartphones, and it shows in the analysis of revenue by platform. 44% of the revenue was driven by smartphones and 37% came from high performance computing, jointly making up 81%.

North America has been a key customer base for TSMC for more than a year and is continuing to grow. The American market rose in importance from 59% in Q3 2020 to 65% in Q3 this year. China has proved to be the company’s weakest market with revenue decreasing from 22% of the total in Q3 last year to 11% in Q3 2021.

TSMC is outperforming its Taiwanese competitors. United Microelectronics Company, a semiconductor company based in Taiwan, saw revenue in Q2 at $1.83bn, against TSMC’s $13.29bn Q2 revenue.

However, TSMC is more equally matched when compared to Intel, the American-based semiconductor and processor manufacturer whose products focus more on computers than smartphones. For Q2 2021, Intel reported revenue at $19.6bn with a 57.1% gross margin, 7.1% larger than TSMC’s gross margin for that quarter. Intel forecasted their Q3 revenue to be at $19.1bn, $4.22bn higher than TSMC. However, it predicted the Q3 EPS will be at $1.08, the same as the Taiwanese manufacturer.

What the markets did

Taiwan Semiconductor Manufacturing Company launched on the stock exchange under TSM in 1997 and has been on a steady rise since January 2013 when it was priced around the $18 mark. The TSM stock price dropped during the start of the pandemic from $59.59 on 12 February 2020 to $43.84 on 19 March. When the chip shortage started at the beginning of this year, the TSM stock price skyrocketed to an all time high of $139.84 on 16 February.

In October 2021, the Taiwan Semiconductor share price has been around $110. The market responded positively to the results this week, with the price rising to $115.02 before closing at $114.11 on 15 October 2021.

TSM stock forecast

In terms of the Taiwan Semiconductor share price prediction, CNN asked eight analysts for their TSM stock forecast for 2021 and 2022. Their TSM stock prediction is a median of $139 with a new all-time high of $207. CNN polled 39 analysts as well, and found their consensus was to buy the stock. For predictions in next quarter’s results, they forecast EPS at $1.11 with revenue at $15.6bn.

The 2025 Taiwan Semiconductor stock forecast from WalletInvestor is $219. its short-term prediction says the price will dip below $110 by the end of 2021, before achieving a new all-time high in 2022 at over $140.

FAQs

It depends. The TSM stock forecast from both CNN and WalletInvestor says the share price will increase in 2022, with CNN predicting it to reach a new all-time high of $207. However, predictions can often be wrong, so be sure to do your own research before investing.

It might do. WalletInvestor predicts it will fall to around the $107 mark before increasing in 2022 to above $140. CNN does not see the share price falling and its TSM stock forecast sees a steady increase throughout the next 12 months. Remember prices can go down as well as up. Never invest more than you can afford to lose.

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Currency.com offers the opportunity to buy with leverage, with easily defined stop losses and limits to close positions at a specified price. But remember, while leverage will allow you to make bigger profits if a stock goes up, it will also magnify your losses if the price goes down.

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