To The Moon

After hitting $142 in February 2021, TSMC's stock price moved sideways for a long period. Even when the Nasdaq made record highs, TSMC shares did not rise with it, discouraging countless investors.

In 2022, after the Federal Reserve announced the bad news of interest rate hikes, the stock prices of high-valued chip leaders all began to fall.

At this conjuncture, TSMC instead began to break free from its sideways drift and was likely to hit new all-time highs.

Why was that?

On January 10, TSMC disclosed its revenue data for December, which greatly exceeded market expectations.

The previous stock price movement was only a small fluctuation. The disclosure of the fourth quarterly report will make TSMC--the king of global chip foundries--open a new chapter!

Stellar Results in Q4!

In the fourth quarter of last year, TSMC reported revenue of $15.74 billion, up 24.1% year-on-year, topping the guidance of $15.4-15.7 billion.

The fourth quarter report was also in line with market expectations as the revenue data were already disclosed in the monthly revenue report on January 10.

In terms of sales data, positive growth was achieved in the fourth quarter for smart phones, HPC, IoT and consumer electronics. It means that the downstream demand for chips is very strong!

By Technology, 5nm technology contributed 23% of revenue in the fourth quarter, a new high since the introduction of 5nm technology;

7nm technology, 27%, a decline in share compared to previous quarters.

So far, 7nm and below technologies together contributed 50% of TSMC's revenue, slightly down from 52% in the third quarter.

Despite of tight capacity, the gradual improvement of the 5nm technology made gross margin rebound in the fourth quarter, reaching 52.7%, among the upper range of 51%-53% guidance.

Net margin of 37.9% in Q4: all-time high!

Looking at 2021, TSMC's revenue in 2021 was US$56.82 billion, up 24.9% year-over-year; net profit US$21.37 billion, up 21.4% year-over-year.

The annually revenue growth rate shows that pandemic undoubtedly speeds up TSMC’s growth!

TSMC continues to soar in 2022!

Demand in the semiconductor industry has been difficult to predict and has obvious cyclical characteristics.

Therefore, the capital market has been worried that the decline in demand for electronic products after the pandemic will affect the performance of semiconductor companies such as TSMC.

But in the earnings call, TSMC brought us surprising news.

First, in the first quarter 2022 earnings guidance:

Revenues in the range of $16.6 - $17.2 billion, with year-over-year growth rate of 28.5% - 33.1%, higher than 24.9% of 2021;

Gross margins among 53%-55%, on track for a record high!

Looking ahead into 2022, capacity will remain relatively tight and annual sales growth will be above 20%.

In 2021, TSMC's capital expenditure surpassed $30 billion. The amount of capital expenditure is expected to be between $40-44 billion in 2022, with a year-on-year growth rate of 33%-47%, which indicates the strong downstream demand.

 At the same time, TSMC gave the market a sure sign that it expects revenue to grow at a compound annual rate of 15-20% in the next few years!

I have to say, TSMC's Q4 report is impressive!

Conclusion：

TSMC has gradually become the leader in advanced technologies since its mass production of 7nm process in 2018, leaving its strong competitors Intel and Samsung behind.

Advanced technologies are highly profitable, and its demand exceeds supply. So Apple, AMD, Nvidia and other major manufacturers all rush to purchase its products.

Since 2018, TSMC's PB ratio has risen all the way up and reached 8 unprecedentedly in 2020 as the result of electronics demand explosion under pandemic.

With its technical strength and dysfunctional cyclical characteristics of semiconductor, it is not reasonable to use PB ratio to value TSMC. Currently, the development of technology of 5G, artificial intelligence and IoT has pushed up the demand for electronic products. 

As an electronics infrastructure, TSMC's performance will become more stable.

As for its profits in 2021, PE ratio was only 32. Considering the 2022 revenue growth rate of up to 20% or more, TSMC this time have the possibility of hitting a new all-time high!$台积电(TSM)$