Shares of Taiwan Semiconductor Manufacturing Co. led chip gainers Thursday after the third-party silicon-wafer manufacturer’s quarterly results and “flattish” outlook topped Wall Street estimates, and scaled back its capital spending for the year.
The chipmaker said net income surged 80% to $9.27 billion , or $1.79 a share, as revenue rose 48% to $20.22 billion from the year-ago period. Analysts surveyed by FactSet had forecast earnings of $1.65 per ADR and revenue of $19.44 billion.
ADRs of TSMC TSM, +5.22% rallied more than 9% Thursday, and were last up 5.8%, compared with a 2.8% gain on the PHLX Semiconductor Index SOX, +3.02%, and near-2% gains on both the S&P 500 index SPX, +2.26% and the tech-heavy Nasdaq Composite Index COMP, -0.18%. TSMC 2330, -0.63% shares trading in Taipei slipped 0.6%.
“Our third quarter business was supported by strong demand for our industry-leading 5nm technologies,” said Wendell Huang, TSMC chief financial officer, in a statement. “Moving into fourth quarter 2022, we expect our business to be flattish, as the end market demand weakens, and customers’ ongoing inventory adjustment is balanced by continued ramp-up for our industry-leading 5nm technologies.”
For the fourth quarter, TSMC executives guided for revenue between $19.9 billion and $20.7 billion, while analysts had modeled $19.84 billion on average, according to FactSet. By morning trading, that average estimate had risen to $20.02 billion. The company also guided for an operating margin between 49% and 51%.
Additionally, the fabricator said it was scaling back on capital spending for the year to $36 billion from a previously estimated $40 billion to $42 billion. That move was expected given how quickly a global chip supply shortage flipped into a glut, calling for a trimming back in capacity that was pledged in the midst of the shortage. ADRs of TSMC were battered Tuesday following a report that customers are cancelling orders and that the fab’s filled capacity will fall over the next six months.
TSMC supplies chip makers who do not have their own fabrication plants, known as fabs, such as Nvidia Corp. NVDA, +3.83%, Advanced Micro Devices Inc. AMD, +1.73%, and Apple Inc. AAPL, +2.34%. Some companies do operate their own fabs like Intel Corp. INTC, +3.93%, Micron Technology Inc. MU, +3.87%, and Texas Instruments Inc. TXN, +1.94%
Read: Chip stocks could suffer worst year ever as effects of shortage-turned-glut spread
The year has been especially rough on the semiconductor industry, with a 44% freefall on the SOX index at Wednesday’s close. The index currently counts $332.48 billion TSMC as the largest market cap company among its 30 components. The Hsinchu, Taiwan-based third-party fab has spent the year swapping that top spot with Nvidia, which is currently valued at $283.35 billion and still presides as the largest U.S. chip maker by market cap, with Broadcom Inc. AVGO, +2.15% trailing at $180.85 billion.
Also trailing is the SOX index’s performance, compared with the S&P 500 index’s SPX, +2.26% 25% tumble and the 33% drop on the tech-heavy Nasdaq Composite Index COMP, -0.18%. Investor optimism has all but run out for semis as analysts chase a trajectory that threatens to make 2022 the worst year ever for chip-related stocks as PC shipments suffer their steepest decline on record.
Hours before TSMC reported earnings, Applied Materials Inc. AMAT, +4.53%, which supplies fabs with the complicated machinery required in cleanrooms, warned that widened restrictions on products it can sell to China will cost it upwards of $1 billion in sales spread over a six-month period.
The company is the latest to join “the $1 billion” group that has formed over the past few months. Applied Materials’ warning follows one from one of the better performing chip makers this year, AMD, which shaved $1 billion off its forecast as sales to PC vendors plummet, continuing what has become the missing $1 billion trend this quarter.
Read: Chip stocks crushed to two-year low as more tech, AI ban to China add to woes
At the end of September, memory-chip maker Micron said the “unprecedented” market downcycle wore a $1-billion-dollar-sized hole in their pocket for the quarter, and in late August, Nvidia cut $1 billion from its forecast.
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