Taiwan Semiconductor Manufacturing (TSMC) recently announced impressive monthly sales figures, leading some to believe that a chip recovery is on the horizon. However, J.P. Morgan warns that this increase in revenue may not necessarily indicate a surge in demand.
In its October sales report, TSMC, the world’s largest third-party semiconductor chip manufacturer, revealed a 16% growth in revenue compared to the previous year and a significant 35% increase from September. Surprisingly, this marks the first instance of year-over-year growth since February.
Despite J.P. Morgan’s warning, TSMC’s American depositary receipts saw a notable 2.9% increase in Tuesday trading, reaching $99.24.
TSMC solidly dominates the market for high-end chips, manufacturing critical processors for Apple iPhones, Qualcomm mobile chipsets, and processors by Advanced Micro Devices. According to TrendForce, TSMC boasts a commanding 56% market share in the third-party chip-manufacturing business, while Samsung holds a mere 12%.
Hariharan explains that it typically takes three to four months for chip wafer orders to impact TSMC’s sales figures. Therefore, October’s robust performance is likely a result of the manufacturing ramp-up for the latest iPhone processors and Apple’s recently announced M3 processor Macs.
However, Hariharan cautions against expecting a sudden change in orders or demand recovery in other less advanced manufacturing nodes, noting that the effects are unlikely to be seen in TSMC’s 4Q23 revenues due to long cycle times.
In conclusion, while TSMC’s sales growth is undoubtedly remarkable, it should be approached with a measured perspective. The reality behind the surge may not necessarily reflect an immediate increase in demand.
