TSMC beats profit estimates as gadget demand boosts chip sales

[TAIPEI] Taiwan Semiconductor Manufacturing Co (TSMC) reported first-quarter profit that beat estimates on solid demand for chips used in everything from smartphones to cars, while an ongoing shortage increased prices.

Net income rose to T$202.7 billion (S$9.46 billion) in the 3 months through March, the world's biggest contract manufacturer of chips said Thursday (Apr 14). Analysts estimated T$186.1 billion on average. Revenue jumped 36 per cent to a record T$491.1 billion based on previously reported numbers.

Consumers in the US and Europe are snapping up mobile phones, smart televisions and other gadgets from makers such as Apple and Samsung Electronics even as they exit pandemic-era work-from-home arrangements.

Meanwhile a chip shortage is yet to ease - the wait times for semiconductor delivery grew again in March due to China's Covid lockdowns and a Japan earthquake that hit production, according to research by Susquehanna Financial Group.

TSMC has kept production running in China, even as many other factories suspended operations to cope with the local pandemic policy. The chipmaker said in end-March that it will rearrange production priorities to deal with a shift in demand caused by Covid restrictions in China. TSMC wasn't planning to revise down its sales and capital spending forecasts for 2022, chairman Mark Liu said at the time.

TSMC's inventory strategy on key materials such as silicon wafers and industrial gases will be a key focus at the 1Q results briefing, as rising geopolitical tension and slow global wafer capacity gains keep the supply picture foggy.

The company has earmarked US$40 billion to US$44 billion this year to expand and upgrade its facilities - a record outlay intended to keep the company at the forefront of a rapidly evolving technology and sating future demand. But analysts including Credit Suisse's Randy Abrams warn that semiconductor sector growth could slow in the second half as higher interest rates, Chinese lockdowns and rising commodity prices sap spending on consumer electronics.

Shares of TSMC have lost about 7 per cent this year, dragged down by a broader decline in global technology stocks and China's lockdowns which have weighed on consumer demand and affected supply chains. The stock was little changed ahead of the company's report. BLOOMBERG