Chipmaker reports record earnings and strong outlook

Signboard for Taiwan Semiconductor Manufacturing Co. (TSMC) is on display at the company’s headquarters in Hsinchu, Taiwan on Wednesday, June 5, 2019.

Ashley Pont | Bloomberg via Getty Images

TSMSthe world’s largest chip maker posted record second-quarter net income, helping to allay fears of weak demand due to high inflation and an oversupply of some semiconductors in the market.

Here are some of the key figures for the three months ended June 30:

  • Revenue was NT$534.14 billion ($18.16 billion), up 43.5% from last year. This exceeds the NT$524.02 billion average of analyst estimates compiled by Refinitiv.
  • Net income was NT$237.03 billion, up 76.4% year-over-year and ahead of estimates. It was a record quarter in terms of net income for TSMC.

The company that AppleRussia’s largest chip supplier said it expects third-quarter revenue to be between $19.8 billion and $20.6 billion, up from $14.8 billion in the same period last year.

However, TSMC CEO Xi Wei said that some of the company’s capital expenditures will be “carried over to 2023.” He cited “bigger supply chain issues” that are extending delivery times for some chip manufacturing equipment.

The strong results and outlook, but caution on spending, underscore the caution chipmakers are taking at a time of concern about rising prices and the impact on consumer demand, as well as high chip supply.

Chip stocks have fallen this year due to a host of concerns, including supply chain disruptions, a Russian-Ukrainian war and rising material prices. Last month, an American chip maker Micron warned about decrease in demand for consumer goods.

But in general, TSMC’s results dispelled some concerns in the chip market and, in particular, around the company itself.

“I would say TSMC is a class of its own with a well-built moat,” Se Ho Ng, China Renaissance analyst, told CNBC.

He said that TSMC’s management expects the company to “continue to grow even with a downturn in the overall chip market” on a year-over-year basis.

TSMC makes chips for other companies and has some of the most advanced manufacturing processes in the world. The company said it sees weakness in the consumer market, such as smartphones and PCs, but its data centers and automotive business remain “solid.”

Meanwhile, investors are worried about a potential oversupply of chips in the market. Inventory levels are currently quite high, suggesting weak demand, which could put pressure on semiconductor prices.

But TSMC’s Wei said he’s seeing a decline in inventory levels and said the current adjustments are reminiscent of a “typical cycle” for semiconductors.

“We believe the current semiconductor cycle will be more like a typical cycle with a few quarters of inventory adjustments likely in the first half of 2023,” Wei said.