HSBC has increased the price target on Taiwan Semiconductor Manufacturing Co. Ltd. (2330:TT) (NYSE: TSM) to NT$1,600.00, up from the previous NT$1,535.00, while reiterating a Buy rating on the stock.
The adjustment reflects a positive outlook for the semiconductor company's upcoming 2-nanometer (2nm) chip technology, which is expected to begin contributing to revenue in the second half of 2025.
HSBC's optimism is based on the anticipated higher average selling price (ASP) premium of over 30% for the 2nm chips compared to existing technologies. Additionally, an HSBC analyst predicts better customer engagement with the 2nm products than with the 3nm chips, which should result in higher utilization rates and, consequently, greater gross margins (GM) for the fiscal years 2025 and 2026.
The analyst's forecast for TSMC's 2nm chip revenue stands at a robust TWD568 billion for the fiscal year 2026, which is the first full year of its expected contribution. The figure is significantly higher, by 40%, than the consensus estimates on the Street. In contrast, the 3nm chips are projected to generate TWD160 billion in their first full year, which is 2023.
In light of these projections, HSBC has raised its gross margin estimates for TSMC for fiscal years 2024 to 2026 to 55.8%, 59.2%, and 60.1% respectively, up from the previous estimates of 54.7%, 57.1%, and 57.2%.
These revised figures surpass the consensus estimates of 54.0%, 55.3%, and 55.9% for the same periods. The analyst suggests that TSMC's gross margin could potentially reach 60% in the second half of 2025.
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