According to a report by HSBC Research, it is reported that Samsung, a competitor of Taiwan Semiconductor (TSM.US), is working hard to improve the yield of its 3-nanometer process, hoping to seize market share from Taiwan Semiconductor. However, the bank believes that Taiwan Semiconductor will maintain its leading position and will still be the preferred partner for advanced wafer outsourcing.
The bank believes that Taiwan Semiconductor's current 3-nanometer process yield is still higher than that of other competitors (the bank estimates 80% to 85%). Even if its competitors' yield gradually improves to nearly 60% in the fiscal year 2025, there is still a certain gap between them and Taiwan Semiconductor. The fiscal year 2025 will be the third year of Taiwan Semiconductor's N3 technology, which means it will have more production experience and will be difficult for other companies to compete with it.
The bank expects that with the continuous growth of orders for artificial intelligence (AI) or high-performance computing (HPC), Taiwan Semiconductor's advanced nodes will have a strong year in fiscal year 2025. At the beginning of fiscal year 2025, prices may increase by 5% to 10% to reflect strong demand. Therefore, the bank currently expects Taiwan Semiconductor's fiscal year 2025 revenue to grow by 25% year-on-year, higher than the market's expected 21%. Under higher utilization and pricing strategies, the bank expects Taiwan Semiconductor's gross margin for fiscal year 2025 to improve from 53% in fiscal year 2024 to 55.4%, higher than the market's expected 54.4%. Earnings per share are forecast to increase by 33% year-on-year, compared to an increase of 18% in fiscal year 2024.
In addition, the bank raised its earnings per share forecast for Taiwan Semiconductor in fiscal years 2025 and 2026 by 5.6% and 13.1% to NT$50.77 and NT$62.25, respectively, which are 1.8% and 2.7% higher than the market's expected levels, mainly reflecting the potential price increase of advanced nodes. The bank reiterated its "buy" rating on Taiwan Semiconductor (02330.TW) and raised its target price from NT$1,025 to NT$1,370, believing that the higher fees have not been fully reflected.