TSMC data center chip demand drives Q1 sales to near decade high

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April 16—The Taiwanese Semiconductor Manufacturing Company (TSMC) posted first-quarter sales of NT$310.5 billion ($10.3 billion), its highest quarterly revenue in a decade, according to analyst firm Refintiv. The company attributed its robust performance to increased demand for high-performance computing (HPC) chips and the release of new 5G-compatible smartphones.

However, TSMC also lowered its annual income forecast by a few points because of the economic impact of COVID-19.

TSMC’s Q1 2020 Financial Results

In nearly every metric, TSMC achieved some measure of growth in the first quarter.

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The firm’s January to March revenue increased by 42 percent from the same period in 2019. The firm also recorded net income of NT$116.9 billion ($3.89 billion) in Q1, an uptick of 90.6 percent year-over-year. The chipmaker’s earnings surprised market analysts who pegged its sales at NT$105.83 billion ($3.52 billion). Moreover, the manufacturer reported earnings per share of NT$4.51 ($.15), up 90.6 annually.

The only declining metric in the firm’s report is a 2.1 percent drop off in its sales from the fourth quarter.

Though the manufacturer did not break down its income by segment, the fabricator noted increased sales of HPC chips drove its healthy Q1 revenue. Because of COVID-19, millions of staffers have transitioned to working from home and have begun using teleconferencing tools regularly.

As a result, telecommunications companies and online service providers have seen a massive uptick in bandwidth consumption, which necessitated hardware upgrades to handle the new level of throughput. TSMC first indicated the coronavirus pandemic bolstered rather than hurt its revenue when it released a preliminary earnings statement last week.

TSMC’s Flat Second Quarter Outlook

Despite its Q1 performance, the firm expects its second-quarter revenue will be “flattish.” CFO Wendall Huang said “weaker mobile product demand” will balance out the company’s HPC and 5G chip sales. In an earnings call, the executive noted TSMC predicts handset shipments will decrease by a “high single-digit” percent this year.

The Taiwanese corporation drives roughly 50 percent of its sales from making smartphone components for brands like Apple and Huawei.

TSMC provided guidance its second-quarter revenue will range from $10.1 billion (NT$303.94 billion) to $10.4 billion (NTS312.97 billion). The company also lowered its full-year revenue growth forecast from 20 percent to the “mid- to high-teens.”

TSMC’s performance in the second half of 2020 will mainly depend on how consumers take to new 5G-enabled smartphones. If the public seeks out new iPhones and P40s in droves, the manufacturer will likely continue its record earnings streak. But if buyers hold off on upgrading due to unstable market conditions, its financial picture will not be as rosy.

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