Taiwan Semiconductor Manufacturing Company (TSMC) raised its full-year revenue forecast for a second time after the world’s largest contract chipmaker enjoyed a record quarter as Covid-19 boosted demand.
The company said on Thursday that in the three months to September, its net income rose 36 per cent year on year to NT$137bn ($4.7bn), its highest-ever quarterly net profit, while revenues increased 22 per cent to NT$356bn. Those figures outperformed both its own forecast and analysts’ expectations, prompting it to upgrade its 2020 outlook.
“We expect to outperform the industry and grow by about 30 per cent in 2020 in US dollar terms,” CC Wei, TSMC chief executive, told investors on the company’s earnings call. The group had previously said after its second-quarter earnings that it expected 2020 revenues to grow 20 per cent.
TSMC controls more than half of the world’s market for made-to-order chips and is closely watched as a bellwether for global electronics demand. Although the coronavirus pandemic has driven most big economies into recession, the company’s earnings have continued to grow through the tumult.
The group on Thursday pointed to strong performances across all its product segments and said it expected that robust demand tied to 5G smartphone launches and high-performance computing would continue to drive growth.
TSMC forecast revenues would be between $12.4bn and $12.7bn in the fourth quarter, an increase of up to 22 per cent over the same period last year.
Taiwan’s chip exports received a boost in August and September as Chinese technology group Huawei raced to build large stocks of semiconductors before US sanctions prohibiting it from buying chips made with US technology took effect in mid-September.
But analysts said the bullish outlook indicated that demand from TSMC’s customers — companies that supply chips for everything from Apple’s iPhones to electric vehicles in China — was broad-based and went beyond a rush of orders from Huawei.
TSMC said disruption to global manufacturing networks caused by the pandemic had driven buying of chips among a large range of customers. The company forecast that inventory levels in the chip industry would remain high at the end of the year.
“We expect our customers’ inventory to remain above the seasonal norm for a longer period because they have some concerns about supply chain security,” said Mr Wei.
TSMC could receive an additional boost if chip design companies shift manufacturing orders for the Chinese market away from Semiconductor Manufacturing International Corporation (SMIC). The US Department of Commerce last month told US semiconductor equipment makers that they would be required to apply for a licence to supply SMIC. Washington believes there is a risk that SMIC products will end up benefiting the Chinese military.
Shares of chipmakers including UMC, TSMC’s smaller Taiwanese rival, have surged as the move could hamper SMIC’s expansion.