Whatās Going On Here?TSMC reported record results on Thursday, and the worldās biggest contract chipmaker only had to force its employees to live at work to make it happen. What Does This Mean?Thereās an adage that youāre never more than six feet away from a rat, but TSMCās chips are probably even closer: so high was demand for smartphones, TVs, and other gadgets last quarter that youād find them everywhere. And the chipmaker made the most of that demand, albeit with some suspect compromises: it kept production running at its Chinese factories by having workers sleep on site, even as other companies ā or as TSMC calls them, slackers ā shut down in response to Covid-related restrictions. It was able to hike prices by as much as 20% too, in the companyās biggest-ever single increase. Put them together, and TSMCās revenue and profit jumped 36% and 45% from the same time last year. Why Should I Care?Zooming in: How does TSMC like them apples?
The time between an order of chips and delivery hit almost 27 weeks across the industry last month, but TSMC wants to bring that down: it announced plans to spend up to $44 billion on upgrading existing facilities and building new ones in the US, Japan, and more this year. The chipmakerās getting a taste of its own medicine on that front, mind you: it could be forced to wait at least 18 months for essential chipmaking equipment.
The bigger picture: Too much of a good thing.
Chip sales have been climbing 20% a month or more for almost a year now, but thereās no guarantee itāll continue. For one thing, the synchronized decision of every chipmaker to build up stockpiles and boost manufacturing could lead to oversupply, while an increasingly likely economic slowdown could damage demand. That might be why an index tracking some of the worldās biggest chipmakers has underperformed the US stock market by 14% this year. | 