Buy The Chip

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What's going on?

TSMC – the world’s biggest contract chipmaker – reported booming quarterly results on Thursday.

What does this mean?

TSMC controls over half the global market for made-to-order chips, and it boasts the most advanced semiconductor production technology in the world. So it’s hardly a surprise that its products were still in high demand from the likes of Apple – which has launched five different types of chip in the last 18 months alone – and the carmaking industry. That helped TSMC grow its revenue by an expectation-busting 44% last quarter from the same time last year, while profit jumped 77% in the biggest uptick in two years. The chipmaker said it’s “highly confident” about the future too: it upped its revenue outlook, saying it was experiencing plenty of demand for the kinds of chips used in AI and 5G. Well, obviously: Bill Gates isn’t exactly going to take over the world with a can-do attitude alone.

Why should I care?

The bigger picture: TSMC is playing it safe.
Investors have been daring to dream that the economic slowdown hasn’t impacted chipmakers yet, and TSMC’s results will have given them more faith. But there are signs that a dropoff is on the way: demand for chips specifically used in consumer electronics is starting to wane, which analysts think will come back to hurt TSMC toward the end of the year. That might be why the firm said it’s planning to push some of this year’s planned spending into 2023.

Zooming out: If in doubt, bribery.
TSMC’s still going ahead with plans to build overseas plants, including a massive American hub in Arizona for $12 billion. That’ll come as welcome news for the US government, which has been trying to bring chipmaking back to its shores in a bid to counter China’s growing economic power. In fact, it’s currently debating whether to offer $52 billion worth of incentives to get this party started.

Originally posted as part of the Finimize daily email.

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