TSMC: shrinking transistors power a growing giant

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“Overcoming the worst of chip shortages” was a common phrase in news headlines and analyst reports late last year. Investors rapidly lost their share of chip makers following a slight increase in automotive chip inventories in November. Record profits at the world’s largest contract manufacturers of microprocessors suggest that those investors were sold out prematurely.

TSMC released quarterly records Profit On Thursday, higher-than-expected sales increased 16.4% to NT $ 166 billion ($ 6 billion). The global shortage of semiconductors, which are important components in all fields, from automobiles to smartphones, continues to boost profits.

It usually takes 10 weeks to deliver your tip order. The waiting time was extended to 26 weeks in December. Several large ports in mainland China were closed last week. It will further disrupt the supply chain. Over the next few months, we expect longer delivery times and a surge in client order backlogs.

TSMC is increasing capital spending by up to $ 44 billion this year to meet unprecedented demand. This group is already leading global rivals such as Intel. If you upgrade the technology and increase its capacity, it will remain unattackable.

Businesses need to take advantage of strong new demand flows for advanced chips manufactured using 5 nanometer (nm) technology. Expensive and profitable 5nm chips account for almost a quarter of total wafer revenue in the last quarter, helping TSMC maintain a high operating margin of 42%.

5nm chips should support TSMC’s growth as demand for most other chips is starting to decline. This happens when the industry’s current capacity expansion is complete. 5nm technology isn’t just the key to powering the latest smartphones and cars. It is also the key to technologies such as artificial intelligence, autonomous driving and 5G.

Only two companies, TSMC and Samsung in South Korea, can mass produce 5nm chips. The latter uses most of its capacity to supply its own range of electronic consumer goods. As a result, TSMC remains a more attractive contract manufacturer for customers such as Apple.

According to S & P Global, TSMC shares are trading against Intel at a premium of two-thirds and about 25 times higher futures earnings. However, as US manufacturers improve their ratings, the gap is narrowing and TSMC’s own proportions are weakening. It’s time for Taiwanese chip giants to get their own upgrades.

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