The ongoing global-wide semiconductor device shortage, while an ongoing concern for many industry supply networks including high tech, automotive and equipment products, is the financial benefit accelerator for semiconductor industry players. To bellwether examples to highlight are TSMC and Samsung Electronics.
Taiwan Semiconductor Manufacturing Company (TSMC)
The globe’s leading chip fabricator TSMC reported a new quarterly sales record for the December 2021 ending quarter. Total quarterly sales for the fourth quarter amounted to $15.74 billion, up 24 percent on a year over year basis. Net income in the quarter was reportedly up 16.4 percent. The Taiwan based producer further reported quarterly operating margins of 41.7 percent, and net profit margin of 37.9 percent. Each is quite healthy for a business that is so capital intensive, and likely a reflection of continued full blown capital utilization.
Management’s guidance for the current first quarter of 2022 reflected an expected total revenue growth of between $16.6 billion to $17.2 billion. Operating profit margin is expected to be between 42 percent and 44 percent. Management commentary relative to Q1 business expectations was increased demand supported by HPC-related sales, continued recovery in the automotive segment, and a milder smartphone seasonality than in recent years.
Semiconductor and electronics components supplier Samsung Electronics is forecasting that the company expects its December ending fourth quarter operating profit to increase 52 percent, to roughly $11.4 billion. That number was reportedly below equity market expectations. However, management indicated that the drop in operating profit was because of a one-time bonus paid out to the company’s employees. Total sales are expected to increase by 24 percent in the fourth quarter, amounting to a new record in quarterly revenue performance. The company is expected to formally report December ending quarterly financial performance by the end of January.
According to financial media, Samsung profitability gains were fueled by strong demand for computer server memory chips but impacted somewhat by seasonal declines in DRAM and NAND memory chips. In its commentary, The Wall Street Journal noted that the company’s contract chip manufacturing business was expected to benefit in increased profitability amid market capacity shortfalls relative to overall demand.
In early December, Supply Chain Matters alerted our readers to a major corporate restructuring involving the South Korea based company, placing the conglomerate’s electronics components and semiconductor business as the engine for future growth and profitability. This restructuring has been characterized as a stunning and surprise move and includes combining two of its operating divisions while replacing the individual heads of its existing three business units. The Wall Street Journal characterized this move, in part, as better allowing the company to compete against TSMC for advanced semiconductor chip development as well as fend off existing rivals.
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