To The Moon

Today after the market closed, TSMC announced their February 2023 revenue of NT163.174bn, which represents an increase of 11.1% y-o-y but -18.4% growth m-o-m. This comes as a slight disappointment after January’s strong growth. YTD Feb revenue achieved NT319.1bn, which is approximately 60+% of TSMC’s 1Q23 guidance.

TSMC management had previously guided the market that its revenue in 1Q23 will decline 14.2% q-o-q at the midpoint guidance.

It seems like TSMC’s top clients such as Apple and Qualcomm are reducing chip production due to weak demand and inventory corrections across the end market. On the other hand, there should be some positivity from Nvida as demand for its gaming GPU has largely recovered sequentially. AI Chip is another potential upside.

Currently, the semiconductor industry is experiencing a downturn, but TSMC anticipates a demand recovery in the latter half of 2023. In the near term, since investors has already reduced its expectation on the earnings, TSMC share price could potentially drive upwards if they delivered on this lowered earnings expectation.

I still highly favour TSMC despite this temporary setback. TSMC's competitive advantage lies in its consistent high expenditure on capital and research and development, stable customer base and capacity utilization cycle, and aggressive depreciation strategy. These factors are crucial in maintaining the company's leadership and cost advantage. Additionally, government subsidies and regional pricing strategies can help mitigate the cost pressures of factory construction. Furthermore, as a leader in advanced manufacturing processes, TSMC has considerable pricing power due to its high product yield and performance stability. Despite increased operating and production expenses, TSMC can pass on the costs to downstream enterprise users, ensuring its position in the market.

@TigerStars @Daily_Discussion