TSMC forecasts Q3 revenue growth because of strong 5G, HPC, and IoT demand

TSMC is no longer taking orders from Huawei.

Taiwanese Semiconductor Manufacturing Company (TSMC) posted its consolidated earnings for the second quarter, and as reported, recorded significant annual growth. The contract chipmaker also offered guidance for the third quarter that indicates double-digit year-over-year revenue growth. The firm explained its success is due to robust demand for 5G, Internet of Things (IoT), and high-performance computing (HPC) components.

TSMC’s Robust Q3 Forecast

For Q3 2020, TSMC predicts revenues of between $11.2 billion and $11.5 billion. With that sales range, the firm expects to beat its Q3 2019 results by 19.14 or 22.34 percent. The Taiwanese manufacturer also anticipates an operating profit margin of 39 to 41 percent, which would be an annual improvement of 5.97 to 11.41 percent.

TSMC based its third-quarter forecast on “strong demand” for its wafers from 5G smartphone, HPC, and IoT providers.

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The company’s forecast accords with reports noting or anticipating growth in those sectors. As the maker of Apple and Huawei’s mobile device processors, those providers’ plans to launch fifth-generation network-enabled handsets should bolster the foundry’s bottom line. Continuing worldwide coronavirus pandemic prompted work from home transitions should also help the firm’s Q3 sales.

The manufacturer’s forecast of rising IoT chip revenue is somewhat surprising. ResearchandMarkets recently published a study indicating connected system component sales would hit $525.4 billion by 2025. However, the global health crisis is driving rapid adoption of the technology because it enhances remote capabilities.

DigiTimes states TSMC revised its full-year revenue estimate up by 20 percent. The chipmaker also raised its 2020 capital expenditure range to $16 billion to $17 billion, a $1 billion from its previous forecast.

TSMC’s Consolidated Q2 Earnings

TSMC made NT$310.7 billion ($10.55 billion) in sales during the second quarter, exceeding market analysts’ consensus expectations of NT$308.8 billion ($10.47 billion). The company said rises in HPC and 5G infrastructure component sales helped it top its prior-year results by 28.9 percent.

The foundry also improved its profits and earnings per share (EPS) by over 80 percent from 2019. TSMC recorded net income of NT$120.82 billion ($4.10 billion) or EPS of NT$4.66 ($0.16). Last year, the firm’s second-quarter intake amounted to NT$66.77 ($2.27 billion) and EPS of NT$2.57 ($0.08). It also increased its net profit margin from 27.7 percent to 38.9 percent year-over-year.

TSMC’s investments in cutting-edge manufacturing processes and factory optimization paid significant dividends in the June period. As the pandemic and general technological advancement boosted the foundry’s income in Q2, those factors should enable its continued success in Q3.


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