TSMC’s quarterly profit exceeds expectations as margins recover

(Bloomberg) — Taiwan Semiconductor Manufacturing Co.’s quarterly profit exceeded expectations as demand for the chips remained robust despite deteriorating supply chain issues.

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The world’s No. 1 foundry said on Thursday that net revenues for the three months ended September are up 14% to NT$156.3 billion ($5.6 billion), compared to analysts’ estimates of NT$149.6 billion. . The company posted record revenue of NT$414.7 billion for the quarter, according to previously released figures.

Demand for semiconductors that power everything from cars to the latest smartphones has pushed lead times to record highs and helped contract chip makers like TSMC fill the order books. But capacity constraints have limited the Taiwanese company’s ability to take full advantage of the boom, even as it set aside $100 billion to grow production over three years and evaluate potential new plants in Japan and Europe.

Bottlenecks elsewhere in the supply chain, including packaging and testing, and problems in logistics have weighed on the industry. Apple Inc., which accounts for a quarter of TSMC’s sales as its largest customer, is likely to cut its projected production targets for the iPhone 13 by as much as 10 million units this year, Bloomberg News reported this week.

Read more: Apple’s supply chain challenges

Gross margin in the September quarter was a better-than-expected 51.3%, reflecting improvements in “backend profitability and a more favorable technology mix,” according to TSMC. It is recovering from a nearly two-year low reached in the previous three months, partly due to currency movements. TSMC is likely to raise prices next year, Taiwanese media reported in August, a move that could allay concerns about margins.

“TSMC will be the last foundry to raise prices during the ongoing semifinal shortage as some peers have already made two to three raises,” Cowen Inc. analysts wrote. led by Krish Sankar in an October 11 report. “We expect semi-finished product shortages to ease by 2H22 as the foundry industry’s increasing capacity comes online.”

The most advanced technologies accounted for 52% of TSMC’s revenue during the quarter, with 5 nanometers accounting for 18% and 7 nanometers 34%. Smartphones continue to be the largest contributor by product type at 44% of total sales, while automotive customers account for 4% of sales, in line with the previous quarter. TSMC has said it will increase shipments to the sector hardest hit by shortages.

(Updates with company comments.)

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