TSMC raises 2020 sales outlook after profit smashes estimates

Taipei

TAIWAN Semiconductor Manufacturing raised its full-year revenue forecast again after posting a stronger-than-expected 36 per cent increase in profit, buoyed by orders from Apple ahead of the new iPhones.

The world's largest contract chipmaker now expects 2020 sales to climb more than 30 per cent in dollar terms, compared with a previous forecast of growth of more than 20 per cent.

For the current quarter, revenue should be between US$12.4 billion and US$12.7 billion, while gross margin will be between 51.5 per cent and 53.5 per cent, chief financial officer Wendell Huang told analysts.

Previously disclosed monthly numbers showed sales climbed to a record NT$356.4 billion (S$16.9 billion) in the quarter, suggesting that Apple's main iPhone chipmaker is benefiting from a gradual recovery in the global economy.

The company's business typically kicks into high gear in the months before Apple unveils its new phones and the holiday season. It also received a boost during the quarter, as second-largest customer Huawei Technologies raced to stockpile supplies before a US ban on shipments to the Chinese telecom giant came into effect last month.

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On Tuesday, Apple unveiled its latest iPhone lineup, saying two new models will come out on Oct 23, while two other models will arrive three weeks later.

The Cupertino, California-based company expects to build at least 75 million new 5G iPhones this year, roughly in line with its previous flagship launch, said Bloomberg News.

"Increasing semiconductor content from 5G smartphones, continuous AMD CPU market-share gain, Apple silicon, and CMOS image sensors should continue to drive upside in 2021 and beyond," Citigroup analysts Roland Shu and Grant Chi wrote in a research note.

Net income for the three months to September rose to an all-time high of NT$137.3 billion, versus the average analyst estimate of NT$126 billion. Gross margin improved slightly to 53.4 per cent, topping the company's own guidance.

The most-advanced 5-nanometer process technology - used to make Apple's A14 chips - accounted for about 8 per cent of total revenue during the quarter, while 7nm and 16nm made up 35 per cent and 18 per cent, respectively. By business segment, TSMC's smartphone business expanded 12 per cent, while high-performance computing (HPC) posted the strongest growth, jumping 25 per cent.

TSMC continues to invest in expanding and upgrading technology, anticipating strong demand from 5G smartphones, as well as for server chips in a post-pandemic era. Executives said on Thursday that they expect capital spending of about US$17 billion in 2020, the high end of its previously forecast range.

TSMC shed 1.3 per cent on Thursday in Taipei ahead of the earnings. The shares have surged roughly 83 per cent from their March lows amid signs that the company is bouncing back from the worst of the coronavirus-induced disruptions.

Taiwan Semiconductor Manufacturing's third-quarter sales of NT$356 billion, despite a strengthening New Taiwan dollar, is 5 per cent above company guidance.

This may be driven by stronger-than-expected 5-nanometer A14 chipset orders from Apple and mature-node chips, in addition to rush orders from Huawei.

It also implies that TSMC's Q3 operating profit may beat consensus by more than 11 per cent, by our calculations, assuming an operating margin of 41 per cent. BLOOMBERG