- World’s biggest chipmaker talked down demand for months
- Q3 earnings/revenue lower but better than expected
- Stock up 25.5% in 2023 but down 13.5% since June peak
The chip industry slump has been taking few prisoners and Taiwanese firm TSMC (TSM:NYSE) has found itself caught between Scylla and Charybdis in recent months.
But perhaps not for much longer. TSMC, or Taiwan Semiconductor Manufacturing Company, has projected sales of $18.8 billion to $19.6 billion this quarter, ahead of analysts’ predictions. CEO CC Wei said he anticipates that the chip industry’s prolonged slump could be over ‘very soon’, although he flagged uncertainty in relation to China as an ongoing known unknown, in Donald Rumsfeld-speak.
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TSMC is the number-one chipmaker for clients like Nvidia (NVDA:NASDAQ), Qualcomm (QCOM:NASDAQ) and Apple (AAPL:NASDAQ), among many others, producing an estimated 60% of the world’s chip supply and more than 90% of the most advanced chips.
LOWER BUT BETTER RESULTS
Third quarter results released overnight (19 Oct) suggested TSMC may be about to free itself from the shackles of a demand downturn. While revenue and earnings of $17.3 billion and $1.29 per share were way down on a year ago ($19.2 billion and $1.70), a pattern not seen for five years, the numbers beat analyst projections recalibrated lower after guidance downgrades earlier in the year.
Only a handful of manufacturers can make the most advanced chips, so when chip designers go looking for fabrication capacity, TSMC is a company to talk to. That means a spot at the negotiating table regarding anything AI (artificial intelligence).
| TSMC remains the world’s biggest chip fabricator |
| TSMC | 56.4% |
| Samsung | 11.7% |
| GlobalFoundries | 6.7% |
| SMIC | 5.6% |
| HuaHong | 3% |
| Tower | 1.3% |
| PSMC | 1.2% |
| Vis | 1.2% |
| NexChip | 1% |
| Other | 5% |
| Source: Statista |
That said, the chip industry is highly cyclical and very sensitive to sharp peaks and deep troughs as clients build up then run down inventory as technology demand ebbs and flows. TSMC is also caught in the cross hairs of the technological cold war emerging between The West and China, so investors need to tread carefully.
TSMC’s New York-listed stock is up 25.5% in 2023 so far, but at $92.91, has lost around 13.5% since June’s $107.41 high.
