Taiwan Semiconductor Manufacturing Co (NYSE:TSM) reported better than expected profit even as global car manufacturers and PC suppliers continue to scramble for chips. The chipmaker said that the semiconductors shortage across the consumer electronics and auto-making industry could go on up to 2022, leading to the company lifting its spending and growth targets for 2021.
TSMC tops Q1 net income estimates
The company reported a net income was S$6.56 billion in Q1 2021, which is a 19% growth. However, gross margin eased from 54% the previous quarter to 52.4% because of low utilization levels and exchange rate changes. The surge in demand for chips for smart TVs, smartphones, and connected vehicles has plunged the company into the heart of the global chip supply crunch. Chip shortage has led to car manufacturers idling plans and triggered a possible shortage of consumer products such as game consoles. Although the Taiwan-based chipmaker is running fabs at more than 10% utilization, it doesn’t have adequate capacity to satisfy its customers, and as a result, it has committed $100 billion to expand in the next three years.
Auto industry chip shortage to ease from next quarter
However, the company has promised its auto-industry customers that they expect chip shortage to start easing from next quarter, thus alleviating supply disruptions that forced Ford Motor Corp and General Motors to curtail production. CEO C.C. Wei told analysts that although shortage will ease the critical chips, deficits could last through 2021. We said that demand will continue to be high, and they expect to offer capacity supporting their customers by 2023.
This year, TSMC expects $30 billion investments in upgrades and capacity expansion up from its previous estimate of $28 billion. The company’s CGO, Wendell Huang, said that they foresee sales in the next quarter to be around $13.2 billion, which will drive full-year revenue growth of 20% ahead of the predicted “mid-teen” in January.
However, the increased spending means that the gross margin for this quarter will miss expectations at 49.5%-51.5%, evoking concerns regarding long-term profitability.