TSMC Sales Top Estimates as Clout Helps Chip Giant During Slowdown

(Bloomberg). -- Taiwan Semiconductor Manufacturing Co. reported a higher-than-expected quarterly income, indicating that the chip giant is taking advantage of market share gains to weather a slowdown in the industry.

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Revenue at the world’s largest contract chipmaker rose 48% to about NT$613 billion ($19.4 billion) in the third quarter, according to Bloomberg’s calculations. Analysts estimated NT$603 billion on average.

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 forecasted a return of growth for the chip sector in the second half 2023, according to Morgan Stanley.

In recent weeks, other chipmakers warned that they face a tougher market due to increasing inventories and lower orders from data center clients as well as consumers. To balance supply and avoid a price crash, Micron Technology Inc. & Kioxia Holdings Corp. have cut output.

Samsung Electronics Co. reported on Friday its first profit decline 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.

Shares in TSMC dropped 2.9% in Taipei Friday, and have lost 29% for the year.

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. Bloomberg reported that the Californian company is restraining its plans to increase production of its iPhones. This raises questions about the underlying electronics demand.

What Bloomberg Intelligence Says

“For now, 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.”

--Charles Shum, Bloomberg Intelligence

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TSMC seeks growth in areas other than chips for electronics to diversify its business. The Taiwanese company is betting that there will be a growing demand for semiconductors as more cars become digitalized and electrified.

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