Taiwan Semi reports stronger-than-forecast profit

Third-party silicon-wafer manufacturer reported Taiwan Semiconductor Manufacturing Co. reported a stronger-than-forecast 80% increase in profit for the third quarter.

The chipmaker said earnings rose to NT$281 billion from NT$156 billion.


reported earnings of $1.79 per American depositary receipt compared with $1.08 per ADR in the year-ago period. Revenue in dollar terms rose 36% to $20.23 billion.

Analysts surveyed by FactSet had forecast earnings of $1.65 per ADR and revenue of $19.44 billion.


shares trading in Taipei slipped 0.6%.

For the fourth quarter, TSMC executives guided for revenue between $19.9 billion and $20.7 billion, while analysts were modeling $19.84 billion on average, according to FactSet. The company also guided for an operating margin between 49% and 51%.

TSMC supplies chip makers who do not have their own fabrication plants, known as fabs, such as Nvidia Corp.
Advanced Micro Devices Inc.
and Apple Inc.
Some companies do operate their own fabs like Intel Corp.
Micron Technology Inc.
and Texas Instruments Inc.

Shares of TSMC were battered Tuesday following a report that customers are cancelling orders and that the fab’s filled capacity will fall over the next six months. ADRs of TSMC have dropped nearly 47% this year alone.

Read: Chip stocks could suffer worst year ever as effects of shortage-turned-glut spread

The year has been especially rough on the semiconductor industry, with a 44% freefall on the PHLX Semiconductor Index
which currently counts $332.48 billion TSMC as the largest market cap company among its 30 components. The Hsinchu, Taiwan-based third-party fab has spent the year swapping that top spot with Nvidia, which is currently valued at $283.35 billion and still presides as the largest U.S. chip maker by market cap, with Broadcom Inc.

trailing at $180.85 billion.

Also trailing is the SOX index’s performance, compared with the S&P 500 index’s

25% tumble and the 33% drop on the tech-heavy Nasdaq Composite Index
Investor optimism has all but run out for semis as analysts chase a trajectory that threatens to make 2022 the worst year ever for chip-related stocks as PC shipments suffer their steepest decline on record.

Hours before TSMC reported earnings, Applied Materials Inc.
which supplies fabs with the complicated machinery required in cleanrooms, warned that widened restrictions on products it can sell to China will cost it upwards of $1 billion in sales spread over a six-month period.

The company is the latest to join “the $1 billion” group that has formed over the past few months. Applied Materials’ warning follows one from one of the better performing chip makers this year, AMD, which shaved $1 billion off its forecast as sales to PC vendors plummet, continuing what has become the missing $1 billion trend this quarter.

Read: Chip stocks crushed to two-year low as more tech, AI ban to China add to woes

At the end of September, memory-chip maker Micron said the “unprecedented” market downcycle wore a $1-billion-dollar-sized hole in their pocket for the quarter, and in late August, Nvidia cut $1 billion from its forecast.

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