These three words from TSMC are absolutely surprising in light of the chip shortage

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TSMC is the world’s largest foundry. The company takes designs for chips made by companies like Apple, Qualcomm, MediaTek, and others, and builds them. TSMC reported that for the second quarter the company generated a record quarterly profit of 237.03 billion Taiwan dollars ($7.9 billion US dollars), up 76.4% year over year and ahead of estimates. That was a record quarter in terms of net income for TSMC.

During the quarter, revenue was USD 534.14 billion ($18.16 billion), up 43.5% year over year. As you probably know, the pandemic has created a global chip shortage. Foundries were negatively impacted by a shortage of skilled workers, and surprising demand for new cars also fueled increased demand for integrated circuits.
Apple CEO Tim Cook estimated the chip shortage cost Apple lost $6 billion in sales last year. Interestingly, the shortage impacted legacy chips more than the latest advanced silicon.

Surprisingly, TSMC says it has “excessive chip inventory” thanks to “weakening demand” for PCs, smartphones and other consumer products. TSMC says it will take a few quarters for the chip industry to return to equilibrium. TSMC CEO CC Wei said, “Our suppliers have faced greater challenges in supply chains, extending tool lead times for both our advanced and mature nodes,” said Wei.

The management is positive about chip demand for the long term. He says: “Now let me talk about TSMC’s long-term growth prospects. While macroeconomic headwinds bring near-term uncertainties that may persist, we believe that the fundamental structural growth trajectory in long-term semiconductor demand stays firmly in place.”

Still, the trend has not been the friend of TSMC investors, with foundry prices dropping $48.20 or 36.02% over the past six months to $85.63 a share. With the list of customers TSMC has, notably Apple, MediaTek and Qualcomm, the foundry should not be in serious economic trouble in the short term.

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