(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. reported quarterly profit that topped analysts’ estimates, displaying its earnings power even as the chip industry braces for a potential recession and tighter US trade controls.
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Net income rose to NT$280.9 billion ($8.8 billion) for the quarter through September, the company said Thursday in a statement. Analysts estimated NT$264.7 billion on average. Revenue jumped 48% to NT$613 billion, as previously reported.
TSMC is betting on its massive size and industry-leading manufacturing technology to navigate its biggest challenges in years. The US tightened chip trade controls over the weekend, leading to a broad selloff of semiconductor stocks and sending TSMC shares to their lowest in more than two years. Meanwhile electronics demand is slowing, hurt by rising interest rates, soaring inflation and concerns of a potential global recession.
The Biden administration measures limit the ability of companies that use US technology to sell products to China. The restrictions make it more difficult for chipmakers to move their inventories and hit TSMC more severely than previous such actions by the US, Fubon Research analysts led by Sherman Shang said in a note this week. The curbs mean about 5%-8% of TSMC’s total sales will likely be restricted, and it’s “very possible” that TSMC may push out its spending plans and lower its growth targets for the following years, they said. Bloomberg Intelligence estimates TSMC could lose more than 10% of its annual sales because of the restrictions.
Click here for a live blog of TSMC’s results.
TSMC shares have tanked this week, taking its market capitalization to about $320 billion from more than $550 billion in January.
Hsinchu, Taiwan-based TSMC is the world’s largest contract chipmaker, producing for the likes of Qualcomm Inc., Apple Inc. and Nvidia Corp., all of which sell a significant portion of their products into the Chinese market. The Taiwanese firm, which gets about 10% of its revenue from China-based customers, may need to scale back its aggressive investment and growth plans if it has to pull back from certain customers.
The US measures include restrictions on the export of some types of chips used in artificial intelligence and supercomputing, and also tighter rules on the sale of semiconductor equipment to any Chinese company.
The outlook for the electronics industry had already begun to darken. Macroeconomic shocks have suppressed consumer demand and business spending, while unsold inventory among PC vendors built up. Third-quarter shipments of desktop and laptop computers slumped 15%, according to IDC data, and chip companies like Advanced Micro Devices Inc. have said they were surprised by the speed and sharpness of the downturn in demand. Memory makers Micron Technology Inc. and Kioxia Holdings Corp. have announced cutbacks in output of as much as 30% to try and stabilize prices.
TSMC can’t even rely on sustained demand for products of Apple, its main customer, whose growth has benefited the Taiwanese manufacturer for years. While the California company has launched new types of chips to boost the performance of its devices, it has recently backed off plans to increase production of its new iPhones, raising further questions about underlying electronics demand.
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