Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker and a major Apple Inc supplier, is scheduled to announce Q3 earnings results before market opens on Thursday, October 13th.
Latest Results
TSMC posted T$237.0 billion ($7.94 billion) net profit in the second quarter on sustained demand for semiconductors amid a continued global shortage, a 76.4% rise from the same period of the last year.
Revenue for the quarter climbed 36.6% to $18.16 billion, versus TSMC's prior estimated range of $17.6 billion to $18.2 billion.
Q3 Guidance
In its second-quarter earnings report, TSMC expects revenue for the third quarter of 2022 to be between $19.8 billion and $20.6 billion based on the company’s business outlook.
And, based on the exchange rate assumption of 1 US dollar to 29.7 NT dollars, the gross profit margin is expected to be between 57.5% and 59.5%; the operating profit margin is expected to be between 47% and 49%.
3 Most Important Things to Watch:
TSMC's Quarterly Revenue Reaches $19.4 Billion
Revenue at the world’s largest contract chipmaker rose 48% to about NT$613 billion ($19.4 billion) in the third quarter. The company estimated $19.8 billion to 20.6 billion.
Rising revenue at Apple Inc.’s most important chipmaker signals that the largest players in the $550 billion semiconductor industry may avoid the severe downturn investors have feared, helped by resilient demand for some electronics products in the face of rising interest rates and soaring inflation.
Morgan Stanley projected a return to growth for the semiconductor industry by the second half of 2023. Morgan Stanley also crowned $TSMC(TSM) a top pick, calling it “an enabler of future technology”.
TSMC's HPC and Automotive Chips in Focus
AMD's substantial pullback in 3Q revenue guidance may be a harbinger of what's ahead for TSMC. Fabrication orders for high-performance computing (HPC) chips have been the power source of TSMC's quickening sales growth since 1Q21 despite flagging demand for smartphone chips. Top AI chip designers, including Alibaba, are major customers of TSMC's HPC chip foundry services.
To diversify beyond chips for electronics, TSMC is also seeking growth in areas such as next-generation vehicles. The Taiwanese company is betting on growing demand for semiconductors as cars become electrified and more digitized.
TSMC's 3Q sales jumped 48% vs. a year ago, to NT$613 billion. In addition to HPC and automotive chips demand, stronger-than-expected U.S. dollar appreciation vs. Taiwan dollar lends a revenue tailwind.
Concerns Linger About Impact of Potential Recession
Other chipmakers warned in recent weeks that they are facing a tougher market as inventories build up and orders are being cut by the data center as well as consumer tech clients. Micron Technology Inc. is cutting output to try and rebalance supply and avert a price crash.
Last Friday, Samsung Electronics Co. reported its first profit drop since 2019. Shortly before Samsung’s results, US processor and graphics chip maker Advanced Micro Devices Inc. also missed estimates with its third-quarter sales figures, which came in $1 billion shy of its own forecast.
TSMC, the world’s most advanced maker of silicon chips, has benefited from Apple launching new types of chips to boost the performance of its devices. However, Apple is reported to back off plans to increase production of its new iPhones, raising questions about underlying electronics demand.
Analyst Opinions
Charles Shum from Bloomberg thinks overseas capacity expansion will be front and center, especially in the US and Japan, as TSMC pushes to meet customers’ diversification requests and rises to the challenge of growing competition from Samsung and Intel. Rapidly rising depreciation and material costs, coupled with increasing uncertainty in smartphone demand, are putting a cap on its gross margin.”
Analyst Mark Li reiterated his Outperform rating on TSMC (ticker: TSM ) and said it was the “Top Pick” under his coverage. “While some may focus on the correction in 1Q23 and macro uncertainties in the short term, we recommend investors stay patient,” he wrote.
Though Li expects sales in the first quarter of next year to be slightly below expectations as demand for Android smartphones and computers deteriorates, he estimates business will improve starting in the second quarter with earnings growth accelerating in 2024.
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