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Author Message   Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3920 Registered: 05-2011 Posted From: 24.164.46.35 Rating: N/A Votes: 0 Posted on Thursday, January 13, 2022 - 5:39 pm:    Taiwan Semi had a fabulous end to FY21; expects 5G and HPC to be central to a strong FY22 (142.28 +9.77) Taiwan Semi (TSM +7%) had a "fab"-ulous end to FY21, as its revenue growth reached over 20% yr/yr in Q4, a return to growth rates not seen since 3Q20. Growth for the chip makers' bottom line was also strong; earnings rose 16% yr/yr to NT 6.41 per share, topping estimates by double digits. Being the world's most valuable and largest semiconductor manufacturer, TSM paints a good picture of the overall semiconductor industry through its earnings report. As such, one of the most notable comments from TSM during its Q4 earnings call is that it expects capacity to remain tight throughout 2022 as many end markets, such as automotive, PC, data center, and mobile, are creating products with higher silicon content. Despite this tight capacity, TSM predicts that the foundry industry should grow close to 20% for the year. TSM is optimistic that it will outperform this expected industry growth. Another takeaway from Q4 is that operating margins grew by 50 bps yr/yr, slightly ahead of TSM's guidance, to 41.7%. Even more remarkably, the company expects margins to continue to improve in FY22, forecasting a range of 42-44%. The low-to-mid percentage growth across most of TSM's business units contributed to the decent margin improvement in the quarter. One highlight came on the automotive side, where revs jumped 10% yr/yr. Although automotive only accounts for 4% of total Q4 revs, the jump is significant as it shows that the automotive industry is continuing on its path of recovery. Not only is the growth much higher than the minor 5% jump last quarter, but it also builds upon a leap of 27% already achieved in the year-ago period. Looking ahead, we think a big contributor to the stock's movement today, along with the company's expectations for continued margin expansion in FY22, is TSM's Q1 revenue guidance. The company expects revenues of $16.6-17.2 bln for the quarter, smashing estimates. High-performance computing (HPC) is expected to be the driver behind sales growth, coupled with further recovery in automotive. Both should more than offset TSM's forecast of a milder smartphone season compared to recent years. Lastly, TSM predicts that 5G and HPC applications will be major themes over the long term. Both industries should ignite a further jolt in the smartphone, automotive, and internet-of-things markets, given the enhanced capabilities 5G and HPC enable. TSM is thus guiding to long-term revenue (in USD) between 15-20% over the next several years. Overall, TSM's Q4 results point to increasing demand for chips in many additional applications moving forward. We also like seeing that the automotive industry is continuing to recover. Although we were slightly concerned about TSM's efforts to seemingly stockpile chips in the previous quarter, given that a downturn could result in substantial losses, the company is continuing to secure prepayment from its customers, reducing this risk in the process. Bottom line, we believe the 5G and HPC themes should play out nicely in FY22, setting up TSM for a strong year ahead.