TSMC posts 81 percent profit jump for Q2 2020

Taiwanese foundry TSMC had a stellar quarter as the company saw net profits increase 81 percent year-over-year as revenue increased 28.9 percent. Compared with the previous quarter, net income increased 3.3 percent while revenue remained flat. In a paywalled article, FT notes TSMC's customers are building inventory to protect themselves against potential coronavirus supply disruptions.

For Q3 2020, TSMC expects a 9.3 percent sequential increase in revenue.

TSMC (TWSE: 2330, NYSE: TSM) today announced consolidated revenue of NT$310.70 billion, net income of NT$120.82 billion, and diluted earnings per share of NT$4.66 (US$0.78 per ADR unit) for the second quarter ended June 30, 2020.

Year-over-year, second quarter revenue increased 28.9% while net income and diluted EPS both increased 81.0%. Compared to first quarter 2020, second quarter results represented essentially flat revenue, and a 3.3% increase in net income. All figures were prepared in accordance with TIFRS on a consolidated basis.

In US dollars, second quarter revenue was $10.38 billion, which increased 34.1% year-over-year and increased 0.8% from the previous quarter.

Gross margin for the quarter was 53.0%, operating margin was 42.2%, and net profit margin was 38.9%.

In the second quarter, shipments of 7-nanometer accounted for 36% of total wafer revenue and 16-nanometer accounted for 18%. Advanced technologies, defined as 16-nanometer and more advanced technologies, accounted for 54% of total wafer revenue.

“Our second quarter business was sequentially flat, as the continued 5G infrastructure deployment and HPC-related product launches offset weaknesses in other platforms,” said Wendell Huang, VP and Chief Financial Officer of TSMC. “Moving into third quarter 2020, we expect our business to be supported by strong demand for our industry-leading 5nm and 7nm technologies, driven by 5G smartphones, HPC and IoT-related applications.”

Based on the Company’s current business outlook, management expects the overall performance for third quarter 2020 to be as follows:

Revenue is expected to be between US$11.2 billion and US$11.5 billion;

And, based on the exchange rate assumption of 1 US dollar to 29.5 NT dollars,

Gross profit margin is expected to be between 50% and 52%;

Operating profit margin is expected to be between 39% and 41%.

The management further expects the 2020 capital budget to be between US$16 billion and US$17 billion.