TSMC Reports Record Q2 Profits on Demand for Faster Chips

Taiwan Semiconductor Manufacturing Co (TSMC) said quarterly net profit surged 81 percent to a record level and predicted hefty revenue gains for the third-quarter on robust orders for advanced chips.

High-performance chips used in 5G telecommunications and other new technologies have been in strong demand, particularly as more people work from home and companies scramble to add more bandwidth amid the coronavirus pandemic.

The world's largest contract chipmaker estimated third-quarter revenue could climb as much 22 percent from a year earlier to $11.5 billion (roughly Rs. 86,428), a forecast that comes despite losing Huawei Technologies as a customer after the United States slapped a ban on selling to the Chinese company.

"We expect our business to be supported by strong demand for our industry-leading 5 nanometre and 7 nanometre technologies, driven by 5G smartphones, high-performance computing and IoT-related applications," Chief Financial Officer Wendell Huang told a briefing.

April-June net profit came in at TWD 120.8 billion (roughly Rs. 30,833 crores), 8 percent ahead of market expectations, while revenue for the quarter climbed 34.1 percent to $10.4 billion (roughly Rs. 78,210 crores).

Underscoring its bullish outlook, it lifted capital spending plans for this year to $16-$17 billion (roughly Rs. 1.20 lakh crores - roughly Rs. 1.27 lakh crores) from a prior estimate of $15-$16 billion (roughly Rs. 1.12 lakh crores - roughly Rs. 1.20 lakh crores). It spent $14.9 billion (roughly Rs. 1.12 lakh crores) in 2019.

TSMC, which counts Apple and Qualcomm among its customers, said it has made decent progress in filling up capacity since the loss of Huawei orders. It stopped taking new orders from the Chinese telecommunications and smartphone giant in May and does not plan to ship wafers after September 15.

TSMC unveiled plans for a $12 billion (roughly Rs 90,225) plant in Arizona in May, a move widely seen as currying favour with the United States as Washington spars with over Beijing over trade and Huawei.

The plant will make advanced 5 nanometre chips and is due to start operating in 2024, targeting production of 20,000 wafers per month, the company said on Thursday.

TSMC also said it expects the global market for contract chip manufacturing to show mid- to high-teens percentage growth this year, up from a previous forecast of a high single-digit to low teens percentage growth.

TSMC shares have risen about 10 percent this year, giving it a market value of $320 billion (roughly Rs. 24.06 lakh crores), overtaking US rival Intel which now has a market value of $249 billion (roughly Rs. 18.72 lakh crores).

© Thomson Reuters 2020

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