Chip maker TSMC’s record profit beats forecasts ahead of new iPhones

The world’s largest contract chip maker saw its net income for the September quarter rise to an all-time high of US$4.8 billion, buoyed by orders from biggest customer Apple
The Taiwanese company also received a boost during the quarter, as second-biggest customer Huawei raced to stockpile supplies before a US ban on the telecoms giant came into effect in September

Semiconductors

Bloomberg

Published: 4:05pm, 15 Oct 2020

Why you can trust SCMP

Taiwan Semiconductor Manufacturing Co (TSMC) reported a stronger-than-expected 36 per cent increase in profit, buoyed by orders from its largest customers, including Apple, ahead of new iPhone shipments to consumers.

The world’s largest contract chip maker saw net income for the three months to September rise to an all-time high of NT$137.3 billion (US$4.8 billion), versus the average analyst estimate of NT$126 billion.

Previously disclosed monthly numbers showed sales climbed to a record NT$356.4 billion in the quarter, suggesting that Apple’s main iPhone chip maker is benefiting from a gradual recovery in the global economy.

The Taiwanese company’s business typically kicks into high gear in the months before Apple unveils its new smartphones and the holiday season. It also received a boost during the quarter, as second-largest customer Huawei Technologies raced to stockpile supplies before a US ban on shipments to the Chinese telecommunications giant came into effect last month.

Huawei’s stockpiling of chips drives up Taiwan exports for second consecutive month

On Tuesday, Apple unveiled its latest iPhone line-up, saying two new models will come out on October 23 while two other models will arrive three weeks later. The Cupertino, California-based company expects to build at least 75 million new 5G iPhones this year, roughly in line with its previous flagship launch, Bloomberg News has reported.

“Increasing semiconductor content from 5G smartphones, continuous AMD CPU market share gain, Apple silicon, and CMOS image sensors should continue to drive upside in 2021 and beyond,” Citigroup analysts Roland Shu and Grant Chi wrote in a research note.

TSMC said in July that revenue this year will grow by more than 20 per cent in dollar terms and increased its 2020 capital expenditure target by about US$1 billion to between US$16 billion to US$17 billion, in anticipation of strong demand for 5G and high-performance computing-related applications over the next few years.

TSMC shed 1.3 per cent on Thursday in Taipei ahead of the earnings. The shares have surged roughly 83 per cent from their March lows amid signs that the company is bouncing back from the worst of the coronavirus-induced disruptions.

Taiwanese chip maker TSMC warns US-China deleveraging will drive up costs

“Taiwan Semiconductor Manufacturing’s third-quarter sales of NT$356 billion, despite a strengthening New Taiwan dollar, is 5 per cent above company guidance,” Bloomberg Intelligence analysts Charles Shum and Simon Chan said in a report.

“This may be driven by stronger-than-expected 5-nanometre A14 chipset orders from Apple and mature-node chips, in addition to rush orders from Huawei. It also implies that TSMC’s third-quarter operating profit may beat consensus by more than 11 per cent, by our calculations, assuming an operating margin of 41 per cent.”

Post