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According to the Semiconductor Industry Association (SIA), global chip sales rose for the first time in 15 months, indicating that demand is rebounding. Worldwide semiconductor revenue was $48 billion in November, up +2.9% from October and up +5.3% y/y. Also, Taiwan Semiconductor Manufacturing Co (TSM), the world’s most valuable chipmaker that is the main supplier to Apple (AAPL) and Nvidia (NVDA), said today that it expects a return to solid growth this quarter.
The increase in global chip sales in November was led by China, which bought +7.6% more chips than a year ago. Chip sales to Europe rose +5.6% y/y, while sales to the Americas climbed +3.5% y/y. However, chip sales to Japan in November fell -2.8% y/y. The recovery in chip sales prompted Taiwan Semiconductor Manufacturing Co today to project that it now expects revenue growth this year to bounce back to at least 20% for the year, and it is budgeting capital expenditures of $28 billion to $32 billion for this year, versus about $30 billion in 2023.
The semiconductor industry has struggled over the past year due to weak demand from key markets like smartphones and higher global interest rates that have weighed on economic growth and trade and boosted chip inventories. Last week, Samsung Electronics, the world’s largest memory chipmaker, reported its sixth consecutive quarter of declining operating profit, indicating that the return to chip demand growth is likely uneven among manufacturers.
Taiwan Semiconductor Manufacturing Co (TSMC) CEO Wei said today, “Our business has bottomed out on a year-over-year basis, and we expect 2024 to be a healthy growth year,” citing the potential catalysts from the boom in artificial intelligence (AI) development worldwide, which will require powerful chips that his company makes. CEO Wei also said his company will expand its global footprint and move ahead this year with plans for chipmaking plants in Japan, Germany, and the U.S., a sign of confidence about the future of chip demand.
Despite the optimism in chip demand that TSMC expects this year, uncertainty persists. In 2023, TSMC moderated its capital expenditure plans as the global consumer electronics industry grappled with high chip inventories. Also, questions remain about chip demand in China, the world’s largest computing, smartphone, internet, and chip market. In addition, Apple faces headwinds with demand for its latest iPhones, as Jeffries said this week that the iPhone sales slump in China is likely to worsen. Despite the negative roadblocks, TSMC CEO Wei said, “We expect 2024 to be a healthy growth year and are well-positioned to capture a major portion of the market in terms of semiconductor components in AI.”
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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