(Bloomberg) -- Taiwan Semiconductor Manufacturing Co.’s quarterly profit beat estimates after the Apple Inc. supplier shrugged off sanctions on Huawei Technologies Co. to ride demand for cutting-edge chips.
The world’s largest contract chipmaker reported net income fell to NT$66.8 billion ($2.1 billion) in the three months ended June. That compares with the NT$65.7 billion average analysts’ estimate.
TSMC’s solid performance may allay fears of a persistent global chip downturn as Washington and Beijing clash. It previously reported a 4.5% slide in first-half revenue -- its worst January-to-June performance since 2011. It’s now also grappling with efforts by top customer Apple to move beyond hardware, and U.S. export curbs that have hammered No. 2 customer Huawei.
TSMC, the world’s largest player in the business of made-to-order chips, is a barometer for the broader industry as well as Apple, which accounts for about a fifth of its revenue. Its shares stood largely unchanged before the announcement and have gained more than 12% this year.
Longer term, TSMC’s technological edge in chipmaking may help it grab an outsized portion of future demand for advanced semiconductors, particularly as countries roll out ultra-fast fifth generation wireless networks. Orders for crypto mining are also expected to help TSMC’s third-quarter sales, according to Morgan Stanley, which recently lifted its target price on the stock by 9%.
“Earnings growth could gradually pick up in 2H with increasing orders for 5G communication chipsets, improving yield in advanced-node integrated circuit manufacturing and lower inventory levels,” Bloomberg Intelligence analysts Charles Shum and Simon Chan wrote before the results. “TSMC, as one of two makers of 5-nanometer chips, is positioned for faster growth, fueled by strong demand for smaller and faster processors used in high-performance computing and high-end smartphones.”
--With assistance from Cindy Wang.
To contact the reporter on this story: Debby Wu in Taipei at dwu278@bloomberg.net
To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum Murphy
©2019 Bloomberg L.P.
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