TSMC Gross sales Most sensible Estimates as Clout Is helping Chip Large All over Slowdown

(Bloomberg) — Taiwan Semiconductor Manufacturing Co. reported higher-than-expected quarterly revenue, signaling the chip giant is benefiting from market share gains to weather an industry slowdown.

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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 this week projected a return to growth for the chip industry by the second half of 2023.

Other chipmakers warned in recent weeks that they are facing a tougher market as inventories build up and orders are being cut by data center as well as consumer tech clients. Micron Technology Inc. and Kioxia Holdings Corp. are cutting output to try and rebalance supply and avert a price crash.

Earlier on Friday, Samsung Electronics Co. reported its first profit drop 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 of TSMC fell 2.9% in Taipei on Friday and have lost 29% this 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. Still, Bloomberg reported in September the Californian company is backing off plans to increase production of its new iPhones, raising questions about 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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To diversify beyond chips for electronics, TSMC is also seeking growth in areas such as next-generation vehicles. The Taiwanese company is betting on growing demand for semiconductors as cars become electrified and more digitized.

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