(Bloomberg) — Taiwan Semiconductor Manufacturing Co. raised its revenue guidance for the year after quarterly profits rose 45%, helped by solid demand for chips used in everything from smartphones to automobiles.
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Annual dollar sales will beat previous guidance of more than 20% growth, the world’s largest contract chip maker said on Thursday. Revenue will increase to $17.6 billion to $18.2 billion in the quarter ended June, it said, representing growth of more than 30%. According to data compiled by Bloomberg, analysts were estimating an average of $16.9 billion.
The company also forecast higher profit margins, indicating continued demand for cellphones, smart TVs and other devices from makers like Apple Inc. and Samsung Electronics Co. even as consumers exit pandemic-era work-from-home arrangements . Meanwhile, chip shortages have yet to ease — waiting times for semiconductor shipments rose again in March due to China’s Covid lockdowns and an earthquake in Japan that affected production, according to research by Susquehanna Financial Group.
The forecasts allay concerns that the war in Ukraine and lockdowns in China, which are hampering the world’s largest market for chips, are hurting demand for gadgets.
TSMC will spend at least $40 billion to address chip shortages
Strong vehicle sales will also help spur growth this year — CC Wei, chief executive officer of TSMC, said in a conference call that demand for microcontrollers, essential components for cars, remains strong. Automakers are still struggling to secure enough semiconductors, with Stellantis NV saying this week that chip shortages remain at the same level as last year.
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Gross margin, or what’s left of revenue after cost of production, will increase to 56% to 58% this quarter from 55.6% in the first quarter, TSMC forecast. That’s the widest it’s been in at least a decade.
Net income rose to NT$202.7 billion (US$7 billion) in the three months to March, beating the NT$186.1 billion average estimate by analysts. Revenue rose 36% to a record NT$491.1 billion based on previously reported figures.
TSMC has kept production running in China even though many other factories have suspended operations to cope with local pandemic policies. The chipmaker said in late March it would rearrange production priorities to cope with a shift in demand caused by Covid restrictions in China.
What Bloomberg Intelligence says:
TSMC’s inventory strategy for key materials such as silicon wafers and industrial gases will be a key focus when discussing Q1 results as rising geopolitical tensions and slow global wafer capacity increases keep the supply picture gloomy.
– Charles Shum, analyst
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The company reiterated that it has earmarked $40 billion to $44 billion this year to expand and modernize its facilities — a record investment that should keep the company at the forefront of rapidly evolving technology and meet future demand. However, analysts such as Credit Suisse’s Randy Abrams warn that growth in the semiconductor sector could slow in the second half of the year as higher interest rates, China’s Covid policy and rising commodity prices weigh on consumer electronics spending.
TSMC’s shares are down about 7% this year, dragged down by a broader decline in global tech stocks and China’s lockdowns, which have weighed on consumer demand and disrupted supply chains. The stock was little changed ahead of the company’s report, which was released after the market closed.
(Updates with CEO comment in fifth paragraph)
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