Taiwan Semiconductor’s Earnings Are Coming. Here’s What to Watch.

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TSMC shares fell on Tuesday on new US rules on chip exports to China.

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Sam Yeh/AFP/Getty Images

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Taiwan Semiconductor Manufacturing will report its earnings Thursday amid a grim period for chip stocks.

The world’s largest contract chip maker is set to continue to outperform the broader sector, but that may not be enough to lift the stock against a gloomy outlook for the personal computer market and geopolitical tensions.

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TSMC American Depository Receipts (ticker: TSM) are down 47% so far in 2022, despite the company lowering its 2022 revenue growth outlook from 30% to nearly 35% with its second-quarter results in July . Since then the outlook for the semiconductor sector has turned bleak. Last week Advanced Micro Devices (AMD), a key customer of TSMC, said it would miss its revenue guidance in the third quarter, citing weak PC demand.

“We do not believe TSMC is immune from deteriorating market conditions,” recalls the latest reminder of weaker end markets with AMD. However, we do think TSMC will outperform markets in general due to continued share gains, Wedbush analyst Matt Bryson said in a note.

Any comments related to TSMC’s largest customer Apple (AAPL) will be watched closely. In late September, Bloomberg reported that Apple had reversed plans to boost production of the iPhone 14 later this year after the expected surge in demand failed.

Geopolitical tensions are another headwind. The company’s ADRs fell more than 6% on Tuesday, with the sector affected by concerns about the US Commerce Department’s new rules on exports of chips and related equipment to China. TSMC has chip manufacturing facilities in China, including the eastern city of Nanjing.

TSMC has declined to comment on the new US rules during the blackout period prior to its earnings report and any comment on the potential effects of the new rules will be investigated.

The company has already reported monthly sales figures of 208.2 billion Taiwanese dollars ($6.53 billion) in September, down 4.5% from the previous month, but up 36% from the previous year.

Wedbush’s Bryson said the latest figures put quarterly sales in line with management’s guidance for the quarter. Analysts expect sales of $604.9 billion Taiwanese dollars and net income of $264.8 billion Taiwanese dollars, according to the FactSet consensus. Earnings per share is expected to be $10.26 Taiwanese dollars.

TSMC’s sales and margins are set to enjoy a tailwind from a more than 6% decline in the Taiwanese dollar against the US dollar, as the chipmaker’s revenues are largely in dollars, while its expenses are mostly in Taiwanese dollars.

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Credit: www.marketwatch.com /

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