Saturday, April 13, 2024

TSMC Results Irrelevant – US Ban on Chip Technology Exports to China

“TSMC’s strong Q3 2022 results could earn it the ‘last man standing’ moniker given the current sector backdrop. From the Intel and Nvidia profit warnings to more recent negative outlooks from Samsung, AMD, Kioxia, and Micron, it is clear that semiconductor demand is losing momentum. Yet, TSMC managed to deliver growth and provide an outlook above market expectations.

“Despite management warnings of weakening end market demand and customers’ ongoing inventory adjustments, the company remains structurally very well positioned. Its advanced technologies (i.e., 5 and 7-nanometer nodes) accounted for 54 percent of total wafer revenue, up from 51 percent last quarter. This manufacturing technology leadership places TSMC front and centre of any country’s artificial intelligence (AI) strategy, as advanced AI chips require this miniaturisation level.

“Therefore, investors’ concern about the softening of chip demand post-COVID as we likely enter into a global recession pales in front of the escalating US/China trade dispute. While today the focus is likely to be on TSMC’s solid results, the fundamental question in the coming months is how the likes of TSMC, Samsung, and ASML will react to broader restrictions on the export of advanced chips and tools to China announced last Friday. Remaining neutral will become increasingly difficult for companies based in Taiwan, Korea, the Netherlands, or Japan, despite the significant economic costs of not doing so.

“As the flare of geopolitical tension in early August following the visit to Taiwan of Nancy Pelosi demonstrated, the US export bans on chip technology transcends the semiconductor industry. In GlobalData’s view, this is about AI dominance, which underpins what many call the 5th industrial revolution, and, ultimately, about global economic leadership in the next few decades.

“GlobalData’s latest report, Artificial Intelligence (AI) Chips – Thematic Research, predicts that the accelerating adoption of AI in commercial and military use cases will drive global AI chips revenue from $12 billion in 2021 to $130 billion in 2030, at a compound annual growth rate (CAGR) of 30 percent.”


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