TSMC Boosts Sales Forecast for 2021, Confirms Strong Chip Demand

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(Bloomberg) — The Taiwanese semiconductor manufacturer expects sales to rise more than 20% in 2021, underscoring its crucial role in helping alleviate the global chip shortage in the bustling auto industry and other industries.

TSMC, the chip maker of Apple Inc. And a key partner for many of the world’s largest automakers, semiconductor supply is expected to remain tight through 2022, CEO CC Wei said Thursday. Executives said the company will ramp up its production of microcontrollers by nearly 60% this year, which will greatly help reduce chip shortages for its auto customers starting this quarter.

Revenue in the current quarter could rise to between $14.6 billion and $14.9 billion, in line with the average analyst estimate of $14.7 billion. TSMC’s 2021 sales forecast is slightly higher than the previous forecast of 20% full-year sales growth.

“TSMC has taken active steps throughout the first half of this year and will continue to do so through the rest of the year to address the challenges of supplying chips” to the automakers, Wei told analysts. “We have worked dynamically with other customers to reallocate our chip capacity to support the automotive industry around the world.”

While persistent semiconductor shortages have hampered the global economic recovery from Covid-19, suppliers such as TSMC, the world’s largest chip maker, are among the beneficiaries as they race to meet orders. The Taiwanese company is also likely to get a boost from Apple Inc.’s plans. , its largest customer, to supply 90 million units of upgraded iPhones for the second half of this year. Wei said the capacity will remain tight until the end of the year and extend into 2022.

Click here for a live blog post on the TSMC earnings call.

Net income for the quarter ending in June rose 11%, although earnings came in just below analysts’ estimates.

In early July, Daimler AG and Jaguar Land Rover warned that sales would shrink further due to persistent chip shortages, with the latter saying second-quarter deliveries would be 50% worse than initially thought. Britain’s economic growth slowed to 0.8% in May, partly due to a 16.4% decline in transmission equipment production due to a shortage of semiconductors.

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Revenue from automotive customers increased 12% from the first quarter, while high-performance computing rose by the same volume. Sales to smartphone customers, the bulk of its revenue, fell 3% in the seasonally slower second quarter.

“As TSMC is likely to continue loading production capacity at very high utilization in the coming quarters, we expect the strong revenue momentum to continue through the end of 2021,” Citigroup analyst Roland Shu wrote in a note last week. “Strong demand but limited increases in capacity in the supply chain will continue to allow TSMC to better leverage its capabilities and enhance its pricing power.”

Gross margin for the second quarter was 50%, below the 51% average analysts had expected, in part due to the Taiwan dollar’s gains during the period. For the September quarter, TSMC forecast gross margin from 49.5% to 51.5%. Analysts had expected 51.5%, according to estimates compiled by Bloomberg.

Meanwhile, in early June, a cluster of Covid-19 infections at a factory in central Taiwan forced King Yuan Electronics Co. Ltd., one of the world’s leading chip testing service providers, has decided to temporarily close operations. This caused minor disruptions to the Taiwanese semiconductor supply chain that many around the world depend on. TSMC said Monday that three of its employees have been confirmed infected, although it does not see any impact on operations.

(Updates with full year forecast, 3Q beginning in first paragraph)

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