The chipmaker posted record earnings and solid forecasts

TSMC, the world’s largest chip maker, posted a record second-quarter net profit, helping to ease concerns about weak demand due to high inflation and an oversupply of some semiconductors in the market.

Here are some of the key numbers for the three months ended June 30:

• Revenue was NT$534.14 billion ($18.16 billion), up 43.5% year-on-year. That beat the average of NT$524.02 billion in analyst estimates compiled by Refinitiv.
• Net income was NT$237.03 billion, up 76.4% year-over-year and beating estimates. It was a record quarter in terms of net income for TSMC.

The company, which is a critical supplier of chips to Apple, said it expects revenue to be between $19.8 billion and $20.6 billion in the third quarter, up from $14.8 billion in the same period last year.

However, TSMC CEO Xi Wei said some of the company’s capital expenditures will be “postponed to 2023.” He cited “major supply chain issues” that are lengthening delivery times for some chip-making equipment.

The strong results and outlook, but cautious spending, underscore the cautious path chipmakers are taking at a time of concern about rising prices and the impact on consumer demand, as well as high chip supply.

Chip stocks have fallen this year amid a host of issues, including supply chain disruptions, the Russia-Ukraine war and rising material prices. Last month, the American chip maker Micron warned of a decline in demand for consumer goods.

But overall, TSMC’s results allayed some worries in the chip market and, in particular, around the company itself.

“I would say that TSMC is in a class of its own, with a well-built moat,” Hsieh Ho Ng, an analyst at China Renaissance, told CNBC.

He said TSMC’s guidance assumes it will “continue to grow even in a scenario where the overall chip market declines” year over year.

TSMC makes chips for other companies and has some of the most advanced manufacturing processes in the world. The company said it had seen weakness in consumer markets such as smartphones and PCs, but its data center and automotive businesses remained “stable”.

Meanwhile, investors were concerned about a potential glut of chips in the market. Inventory levels are currently quite high, indicating weak demand that could put pressure on semiconductor prices.

But TSMC’s Wei said he sees a decline in inventory levels and said the current correction resembles a “typical cycle” for semiconductors.

“We believe that the current semiconductor manufacturing cycle will be more like a normal cycle with several quarters of inventory adjustments likely in the first half of 2023,” Wei said.