Taiwan Semiconductor (TSM): Chip Shortage to Continue into 2022

Last Updated: Thursday, October 14, 2021 10:07 AM | Nick Dey

Taiwan Semi Conductors (TSM) beat earnings and revenue estimates Thursday morning while issuing upside revenue guidance. In pre-market trading, TSM is up 3.78% to $114.01 per share.

Chip Shortage to Continue

In the earnings report, Taiwan Semi reported strong demand across its four growth platforms, which includes smartphone, HPC, IoT, and Automotive-relative applications. While demand remains strong for the company, the industry continues to operate in a persistent shortage that is sending prices higher.

Reuters reported that Taiwan Semi CEO C.C. Wei warned during the conference call that it will continue to operate with tight capacity through 2022. This is bad news for downstream electronics industries as chip supply has slowed production in all sorts of industries. Apple (AAPL), which accounts for one-fourth of TSM’s revenue, announced a cut in iPhone production goals due to the ongoing chip crunch.

Guidance

While TSM’s report isn’t great for electronics companies, the company expects revenues to exceed consensus in the fourth quarter at a range from $15.4 billion to $15.7 billion.

Gross profit margins are expected to fbe between 51% and 53% while operating margins are expected to edge lower from the previous quarter to a range of 39% to 41%.

Japan

In addition to saying it expects tight capacity through 2022, Taiwan Semi announced that it is building a new chip plant in Japan. The plant will use older chipmaking technology, which is a segment of the chip market that is facing a severe shortage, however, production isn’t expected to begin until late 2024.

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