Bullish TSMC keeps capex up to $16 bil. despite US controls on Huawei

10, Jun. 2020

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TAIPEI, NNA - Retaining a bullish stance, Taiwan Semiconductor Manufacturing Co. said Tuesday it would stick to its capital spending plan of around $15 billion to $16 billion this year and assured investors that it would fill the order gap if it is unable to sell chips to Huawei Technologies Co.

The world's biggest contract chipmaker was addressing concerns about the order gap after the U.S. Commerce Department proposed to amend chip export rules to restrict TSMC's sales to China's Huawei amid trade tensions.

The changes would require permits for sales of semiconductors produced abroad with U.S. technology to Huawei, the world's biggest supplier of telecom equipment and second-largest smartphone maker.

When asked at an annual general meeting whether TSMC could fill the order gap left by Huawei subsidiary HiSilicon if the amendment is adopted, TSMC chairman Mark Liu said, "We hope that won't happen. But if it does, we will replace it in a very short time."

Speaking to shareholders in the northern Taiwanese city of Hsinchu where TSMC is based, Liu said the company was not worried as “many of our clients wish to fill the capacity and market.”

TSMC is monitoring the implementation of the amended rules and analyzing the potential impact on the company. Liu added that it is not ruling out the possibility of applying for an exemption.

Regarding the company’s $12 billion investment for a new plant in the U.S. state of Arizona, Liu reiterated that the project is in line with the company’s growth interests. The move would help gain the trust of clients and enlarge its talent pool too.

TSMC is still negotiating subsidies with the U.S. government to build the plant. It believes subsidies would also benefit suppliers partnering with TSMC to form a business cluster.

Although the COVID-19 pandemic has caused the global economy to tumble, it did not hurt the technology sector much, Liu said, adding that iPhone sales were still doing very well.

Upbeat about continuous tech demand, Liu said the widespread adoption of 5G and HPC technologies will accelerate and bolster the growth of TSMC and the semiconductor industry in the coming years.

Last October, TSMC said it was increasing its capital expenditure for 2019 and 2020 after the 5G smartphone growth momentum turned out much stronger than expected. So the company raised its 2019 capex by $5 billion to a record $14 billion-$15 billion.

Remaining optimistic about the company's performance in 2020, Liu said the company will also continue to invest in Taiwan by "basing major research and development capacity here.”

Revenues for January through May rose 33.9 percent to NT$500.42 billion, way above the same period in 2019, the company reported in a statement on Wednesday.

Its May revenue was NT$93.82 billion. Although it was a 2.3 percent drop from April, it was a 16.6 percent increase from May 2019.

In 2019, TSMC delivered its 10th consecutive year of record revenue. Consolidated revenue totaled NT$1,069.99 billion and net income was NT$345.26 billion, with diluted earnings per share of NT$13.32.