TSMC's upcoming 2Q earnings result could exceed guidance, buoyed by a possible boost in fab utilization rate due to a surge in AI-related rush chip orders from Nvidia and other foundry customers. Gross profit margin could rise beyond the guided 52-54%, mitigating its anticipated earnings decline.
$Taiwan Semiconductor Manufacturing Co.(TSM)$, the world's largest contract chipmaker and a major Apple Inc supplier, is slated to report its second-quarter 2023 results before the market opens on Thursday, July 20th. The consensus adjusted net income estimate is $5.524B, according to Bloomberg.
Latest Results
TSMC posted a 2% rise in first-quarter net profit beating market expectations but still the smallest quarterly growth in almost four years as global economic woes dented demand for chips.
TSMC saw January-March net profit rise to T$206.9 billion ($6.76 billion) from T$202.7 billion a year earlier.
Q2Guidance
Based on current business outlook, TSMC management expects revenue to be between US$ 15.2 billion and US$ 16 billion.
Based on the exchange rate assumption of 1 US dollar to 30.4 NT dollars, management expects: Gross profit margin to be between 52% and 54%; Operating profit margin to be between 39.5% and 41.5%.
TSMC Q2 Sales to Beat Estimates
Taiwan Semiconductor Manufacturing Co. reported better-than-expected sales on a boom in artificial intelligence applications demanding more of the industry-leading firm’s chipmaking capacity.
Second-quarter sales totaled NT$480.8 billion ($15.3 billion) according to Bloomberg’s calculations, compared to an average analyst estimate of NT$476.2 billion. Revenue in June came in at NT$156.4 billion.
TSMC is the primary contract manufacturer of Nvidia Corp.’s AI accelerator chips, widely seen as the best hardware for training large data models such as the one underpinning OpenAI’s ChatGPT.
Strong Demand for AI Chips Drive TSMC's Revenue Rebound
TSMC expects a significant revenue rebound in the year's second half.
The launch of new Apple Inc iPhones and strong demand for AI chips from Nvidia Corp, Broadcom Inc, and Advanced Micro Devices, Inc (AMD), with robust wafer-start momentum is likely to trigger the rebound.
Companies like TSMC had a challenging start during 2023 due to supply chain disruptions. However, launching OpenAI and companies like Alphabet Inc, and Amazon.Com, Inc entering the AI race helped the sector redeem its losses.
Nvidia had placed additional orders at TSMC for chips. The chipmaker expects Q2 revenue of $11 billion thanks to the AI boom.
A key focus is TSMC's capacity expansion plan, particularly for advanced packaging, in response to escalated demand from Nvidia and other advanced chip designers. TSMC's US fab construction progress is another key factor -- with mass production set to start in 2H24 -- along with managing manpower supply challenges abroad, which could potentially affect overseas production.
Analyst Opinions
Goldman Sachs analysts raised their target price for the company to NT$700. The stock has risen more than 25% since the beginning of the year, despite the company’s caution it may temper capital expenditure and revenue for 2023 might fall low- to mid-single digits in US dollar terms.
“We view TSMC as the key AI enabler among our Taiwan semi coverage thanks to its leadership stance in leading edge nodes and advanced packaging technology,” said Goldman Sachs analysts Bruce Lu and Evelyn Yu.
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