Semiconductor industry sales are forecast to decline next year but Taiwan Semiconductor Manufacturing is likely to grow despite the chip cycle downturn, a Wall Street analyst says. TSM stock rose on Wednesday.
In a note to clients Wednesday, Needham analyst Charles Shi predicted that Taiwan Semiconductor, also known as TSMC, could grow revenue by about 15% next year. Research firm Gartner has forecast semiconductor industry sales to decline 2.5% in 2023 as the chip cycle enters a downtrend.
Shi believes that TSMC will buck the chip cycle downtrend thanks to its industry-leading technology. The contract chipmaker is making chips with smaller circuits than rivals.
"Fundamentally, we believe TSMC's near-monopoly position in 5-nanometer and 3-nanometer, both of which are expected to ramp meaningfully in 2023, will help the company defy the industry downcycle," Shi said. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
TSM Stock In 'Bottoming Process'
On the stock market today, TSM stock climbed 1.1% to close at 79.66. TSM stock has been in a steep slide since hitting an all-time high of 145 on Jan. 13.
"We think TSM stock is in the bottoming process," Shi said. He reiterated his buy rating on the company's U.S. shares with a price target of 110.
TSMC's 5-nanometer node production will shine in 2023 as more customers beyond Apple use it, Shi said. AMD, Nvidia, Qualcomm and others are migrating to the technology at TSMC over the next few quarters, he said.
Meanwhile, TSMC will ramp its 3-nanometer production next year, with Apple the top customer.
TSM stock ranks No. 14 out of 31 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 63 out of 99.
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