Taiwan Semi reports stronger-than-forecast profit

Analysts surveyed by FactSet had forecast earnings of $1.65 per ADR and revenue of $19.44 billion.

TSMC
2330,
-0.63%
shares trading in Taipei slipped 0.6%.

For the fourth quarter, TSMC executives guided for revenue between $19.9 billion and $20.7 billion, while analysts were modeling $19.84 billion on average, according to FactSet. The company also guided for an operating margin between 49% and 51%.

TSMC supplies chip makers who do not have their own fabrication plants, known as fabs, such as Nvidia Corp.
NVDA,
-0.74%,
Advanced Micro Devices Inc.
AMD,
+0.38%,
and Apple Inc.
AAPL,
-0.46%.
Some companies do operate their own fabs like Intel Corp.
INTC,
+1.16%,
Micron Technology Inc.
MU,
-1.79%,
and Texas Instruments Inc.
TXN,
-1.24%

Shares of TSMC were battered Tuesday following a report that customers are cancelling orders and that the fab’s filled capacity will fall over the next six months. ADRs of TSMC have dropped nearly 47% this year alone.

Read: Chip stocks could suffer worst year ever as effects of shortage-turned-glut spread

The year has been especially rough on the semiconductor industry, with a 44% freefall on the PHLX Semiconductor Index
SOX,
-0.90%,
which currently counts $332.48 billion TSMC as the largest market cap company among its 30 components. The Hsinchu, Taiwan-based third-party fab has spent the year swapping that top spot with Nvidia, which is currently valued at $283.35 billion and still presides as the largest U.S. chip maker by market cap, with Broadcom Inc.
AVGO,
-0.04%
trailing at $180.85 billion.

Also trailing is the SOX index’s performance, compared with the S&P 500 index’s
SPX,
-0.33%
25% tumble and the 33% drop on the tech-heavy Nasdaq Composite Index
COMP,
-7.51%.
Investor optimism has all but run out for semis as analysts chase a trajectory that threatens to make 2022 the worst year ever for chip-related stocks as PC shipments suffer their steepest decline on record.

Hours before TSMC reported earnings, Applied Materials Inc.
AMAT,
-0.38%,
which supplies fabs with the complicated machinery required in cleanrooms, warned that widened restrictions on products it can sell to China will cost it upwards of $1 billion in sales spread over a six-month period.

The company is the latest to join “the $1 billion” group that has formed over the past few months. Applied Materials’ warning follows one from one of the better performing chip makers this year, AMD, which shaved $1 billion off its forecast as sales to PC vendors plummet, continuing what has become the missing $1 billion trend this quarter.

Read: Chip stocks crushed to two-year low as more tech, AI ban to China add to woes

At the end of September, memory-chip maker Micron said the “unprecedented” market downcycle wore a $1-billion-dollar-sized hole in their pocket for the quarter, and in late August, Nvidia cut $1 billion from its forecast.