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> Gross margin for the quarter was 60.4%, operating margin was 50.6%, and net profit margin was 45.8%. Still surprised how profitable TSMC is. Especially as th
by cgeier 4y ago
> Gross margin for the quarter was 60.4%, operating margin was 50.6%, and net profit margin was 45.8%.
Still surprised how profitable TSMC is. Especially as this seems to be below the market expectations (their stock is still falling).
- cronix 4y ago> their stock is still falling Which one's aren't falling? That's a shorter list.
- kaycebasques 4y agoThis is a simple but important point. It's easy to overindex on the idea that a declining stock price means something is wrong with the specific company. But you look at stocks across the board (there is literally an ETF for pretty much every investable country now) and you can see that most stocks across the board are declining at the moment.
- sandos 4y agoI hate economics and know nothing really, but those numbers are the highest margins I have ever seen ? Aren't they profitable because they are in a unique position? I would hope they keep being profitable. What happens if they would fail?
- manuelabeledo 4y ago> those numbers are the highest margins I have ever seen ? It’s not unusual to see 70%+ margins in software products.
- mousetree 4y agoTSMC don't sell software products
- selykg 4y agoThey weren't implying that, see the quote they included. OP said they hadn't seen profit margins this high, and the reply indicates that it's not uncommon to see software even higher. It's just a useful tidbit, related to the point they specifically quoted.
- mousetree 4y agoPerhaps I misread it. My reading was that it's not uncommon to see such high margins given that this is a software product.
- breck 4y agoThough perhaps you could say they sell derivatives of software products? I'm assuming they write the best custom chip design software and that's their biggest competitive advantage (and then operational excellence and savvy business maneuvering et cetera). Though I know nothing about them just guessing as an outsider.
- bismuthcrystal 4y agoPointless argument. At present time you could argue it for every company in the world. Boeing? Sells derivatives of CAD software, not airplanes.
- chrsw 4y agoTSMC doesn't really write chip design software. Maybe they do at some small level but that's not their bread and butter. TSMC provides IP engineers need to design chips to be built by TSMC. That IP is used by CAD tools from major players like Cadence, Synopsys and Mentor (now Siemens, I guess). TSMC's advantage is their superior chip fabrication technology and ability to scale.
- breck 4y agoGot it. TSMC provides an Internal Protocol that others can use to get chips built. An API for physical world. Interesting. Thank you!
- spywaregorilla 4y ago> What happens if they would fail? Meaning what? The factory gets destroyed? A competitor appears? Labor costs rise? Demand falls? So long as the world economy is dependent on the TSMC, a CCP invasion seems unlikely if that's what you mean. The profitability isn't the clearest way to measure that. It could fall for a number of reasons without the geopolitical context changing.
- abudabi123 4y agoShould TSMC fail due to one of the causal factors being geotech political interference on the horizon from the clash of China's Communist Party and the U.S. Wario Blob mic you would think ASML has wargamed plans to supply demand.
- ksec 4y agoYou will also need to look at R&D spend and CapEx. Those profits are funnelled back to that. Basically it is a whole cycle, in order for fat profit margin you need to be at the leading edge in Tech, Yield and Volume. And all three of those requires R&D and CapEx. So you need Fat Profits margin to sustain it.
- hankchinaski 4y agoGreat business but even the current valuation I don’t think a potential invasion of Taiwan is priced in the stock.
- sct202 4y agoTheir stock is falling because of future demand issues coming up with the whole semiconductor industry. Just this week, expanded export bans to China were announced and are an uncertainty on how much volume will be impacted in the future, because no one knows what will get an exemption or not.
- pavlov 4y agoAlso the long-term uncertainty of Taiwan's political situation will continue to weigh on TSMC's stock price. For example, investors may be afraid that there might be some ominous signals coming at this week's National Congress of the Chinese Communist Party, held every five years.
- MangoCoffee 4y ago>Also the long-term uncertainty of Taiwan's political situation Republic of China move to Taiwan since 1945. that's over 70+ years. that's one person born and into retired age. you can question every country on Earth for its long term uncertainty. North Korea constantly shoot off Nukes. Russia is invading Ukraine now. Saudi and Yemen. American just recently left Afghanistan to Taliban after 20+ yrs of Nation building. 70+ yrs peaceful times in Taiwan with some up and down with China seem pretty stable to me. https://en.wikipedia.org/wiki/Taiwan#Republic_of_China_(1945%E2%80%93present) https://en.wikipedia.org/wiki/Taiwan#Republic_of_China_(1945... edit: even USA have some long term uncertainty after Jan 6 (United States Capitol attack or protest?) Trump-backed election deniers is about to be elected into the US Congress.
- photochemsyn 4y agoThe U.S. position on the entire Chinese semiconductor industry is getting increasingly ridiculous. It's not just chips, since China is the one country that's developed efficient monocrystalline silicon ingot production at scale, and solar panels made with that material are far superior to anything made in the USA currently. The USA's financialized short-term thinking has resulted in a failure to develop basic technological infrastructure capability, and China is now in the lead - so the response is, stop trading with China on all things silicon? This is the Tonya Harding team's 'let's try to win by kneecapping our superior competition' mentality, and it's doomed to failure, if not in the short term, than certainly in the long term.
- foobarian 4y agoI wonder how capex is factored into this. If at some point they dropped a few tens of $B on the fab upgrade, and likely need to do so again soon, when does that get subtracted from profits?
- londons_explore 4y agoThere are lots of accounting tricks to allow you to do this pretty much however you like...
- TradingPlaces 4y ago1. Guidance for next quarter was OK not great 2. Any time TSM reduces capital expenditures projections (-10%), that’s a siren.
- Aunche 4y agoPart of it definitely has to do with their compensation is poor by Western standards.
- tiffanyh 4y agoGiven that Apple pays for new fabs to be built for TSMC - that helps their operating margin but hurts their gross margin.