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TSMC to raise 1 billion dollar bond for expansion

Tuesday, September 14, 2021

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, will sell US$1 billion worth of unsecured straight corporate bonds to fund production expansion during a time of lingering supply shortages on the global market.

A TSMC board meeting held on Friday saw the greenlight given to the bond sale after the chipmaker announced in August that it would sell US$1 billion worth of bonds on Taiwan's international bond section of the over-the-counter (OTC) market, the company said Friday.

TSMC said the proceeds will be used to finance the construction of new factories and purchases of production equipment.

The US$1 billion bond will have a maturity of 30 years and carry a coupon rate of 3.1 percent, the chipmaker said.

TSMC said Goldman Sachs Asia's Taipei branch and Taiwan-based KGI Securities will serve as the underwriters of the bond sale with KGI as the leading underwriter.

In addition to the US$1 billion worth of corporate bonds, TSMC's board also approved a project in the August meeting in which TSMC Arizona, a wholly owned overseas subsidiary of the chipmaker, will issue up to US$8 billion worth of unsecured straight bonds, which the company will provide a guarantee for investors.

In recent years, TSMC has been keen to raise funds through bond sales as it has lavishly spent on production expansion and technology upgrades. Like many other enterprises, analysts said, the chipmaker wanted to take advantage of low interest rates in the global markets.

In April, TSMC announced it would spend US$100 billion over the next three years to expand production capacity and upgrade technologies to cement its lead over its peers. TSMC commands a share of over 50 percent of the global market.

Meanwhile, TSMC is scheduled to issue NT$2.75 (US$0.10) in cash dividends per share on Oct. 14 for the company's earnings in the first quarter of this year, when the chipmaker raked in NT$5.39 in earnings per share.

As the largest shareholder of TSMC, the National Development Fund under the Executive Yuan will pocket about NT$4.55 billion in cash dividends in October. Mark Liu (???), TSMC's chairman, and C.C. Wei (???), the company's CEO, are expected to earn NT$35.51 million and NT$19.74 million, respectively, in cash dividends.

Before the cash dividend payout, TSMC shares are scheduled to go ex-dividend on Sept. 16. Due to its large weighting, this move is expected to wipe out about 23 points from the weighted index on the main board.

The ex-dividend date is the date on which a stock begins trading, minus the amount of the next cash dividend to be paid out.

In the wake of strong global demand, which has paved the path for TSMC to hike product prices, a U.S.-based brokerage has expressed its optimism toward the chipmaker's fundamentals in a recent research note, raising a target price on shares of the company from NT$877 to NT$1,014, the highest among the foreign securities houses which follow the chipmaker.

Due to a global supply shortage, TSMC informed all of its clients in August about a 7-9 percent price hike for chips made on its 7nm and 5nm processes, and a 20-percent price hike for chips made on its mature processes, according to recent local media reports. TSMC declined to comment on the reports.

The American brokerage said the global chip supply shortage is likely to continue into 2023 and expects TSMC to raise product prices further over the next two years.

On Friday, TSMC shares rose 0.48 percent to close at NT$622.00 on the Taiwan Stock Exchange.

By: DocMemory
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