Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing) / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing)

<ul>
<li>Persistent fabless inventory issues dampen the slope of H2'23 recovery. FY'23 forecast further reduced to a 10% YoY decline</li>
<li>AI-Related hardware will reach 6% of revenues in 2023, a welcome boost but insufficient to counter the negative impact of macro headwinds</li>
<li>TSMC's earnings provides an important read through on the likely results and outlook for the broader semi ecosystem in the coming weeks. </li>
</ul>


Persistent fabless inventory issues dampen the slope of H2'23 recovery. FY'23 forecast further reduced to a 10% YoY decline
AI-Related hardware will reach 6% of revenues in 2023, a welcome boost but insufficient to counter the negative impact of macro headwinds
TSMC's earnings provides an important read through on the likely results and outlook for the broader semi ecosystem in the coming weeks. 


TSMC. AI Tailwinds No Match For Macro Headwinds

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

TSMC (Taiwan Semiconductor Manufacturing) - ADR / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing) - ADR

<ul>
<li>Japan's semiconductor technology export restrictions took effect on Sunday and are unlikely to ease for China any time soon.</li>
<li>Apple is reportedly telling suppliers that its flagship iPhone volumes will be similar to last year.</li>
<li>Hon Hai acquires 50% stake in German auto chassis maker, marking a significant expansion in its EV manufacturing efforts.</li>
</ul>


Japan's semiconductor technology export restrictions took effect on Sunday and are unlikely to ease for China any time soon.
Apple is reportedly telling suppliers that its flagship iPhone volumes will be similar to last year.
Hon Hai acquires 50% stake in German auto chassis maker, marking a significant expansion in its EV manufacturing efforts.


Taiwan Tech Weekly: Japan Semi Restrictions Take Effect; Apple IPhone Volumes; Hon Hai Acquisition

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<ul><li>TSMC unveiled an in-line 2Q23 results but guided slow 3Q recovery due to longer inventory correction and China weakness despite stronger AI demand.</li><li>Mgmt. guided down FY23E revenue to 10% YoY decline from prior low to mid-single digit decline on macro headwinds, slower China recovery and demand weakness.</li><li>As such, we believe market will turn more conservative on 3Q inventory correction and 4Q demand recovery. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

TSMC unveiled an in-line 2Q23 results but guided slow 3Q recovery due to longer inventory correction and China weakness despite stronger AI demand.Mgmt. guided down FY23E revenue to 10% YoY decline from prior low to mid-single digit decline on macro headwinds, slower China recovery and demand weakness.As such, we believe market will turn more conservative on 3Q inventory correction and 4Q demand recovery. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Technology – Implications of TSMC 2Q23: Slower 3Q and China Recovery

<ul>
<li>TSMC reduced 2023 revenue guidance when it reported results during the week. A weaker than expected economy in China and general economic weakness was blamed.</li>
<li>However, the company's results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a structurally higher margin.</li>
<li>Shares fell after results on a profit taking excuse -- We however note that latest guidance also reaffirmed multi-year strength ahead. Structural Long.</li>
</ul>


TSMC reduced 2023 revenue guidance when it reported results during the week. A weaker than expected economy in China and general economic weakness was blamed.
However, the company's results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a structurally higher margin.
Shares fell after results on a profit taking excuse -- We however note that latest guidance also reaffirmed multi-year strength ahead. Structural Long.


TSMC: 2023 Guidance Reduction Excuse To Take Profit? Guidance Also Affirmed Long-Term Bullishness

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Jeroen Blokland

Global Multi-Asset Investment Strategist

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Cross Asset Strategy

<ul>
<li>While early, the comparison to the previous quarter is remarkable. Almost all sectors reported better-than-expected earnings, but the market reaction has been negative in most cases. </li>
<li>Investors are fixated on inflation and the end of the Fed's tightening cycle. But the strong US labor market means the Fed will want to keep rates higher for longer. </li>
<li>The net percentage of bulls in the survey has risen to nearly 30%, pushing our Fear &amp; Frenzy Sentiment Index further into 'Frenzy' territory.</li>
</ul>


While early, the comparison to the previous quarter is remarkable. Almost all sectors reported better-than-expected earnings, but the market reaction has been negative in most cases. 
Investors are fixated on inflation and the end of the Fed's tightening cycle. But the strong US labor market means the Fed will want to keep rates higher for longer. 
The net percentage of bulls in the survey has risen to nearly 30%, pushing our Fear &amp; Frenzy Sentiment Index further into 'Frenzy' territory.


The Weekly Market Monitor (29) - The Moment of Truth?

Taiwan

Taiwan Semiconductor Manufacturing Company Ltd. manufactures integrated circuits based on its proprietary designs.  The Company offers a comprehensive set of integrated circuit fabrication processes to manufacture CMOS logic, mixed-mode, volatile and non-volatile memory and BiCMOS chips.  Taiwan Semiconductor is an affiliate of Philips Electronics N.V.

TSMC (Taiwan Semiconductor Manufacturing) - ADR (TSM US)

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TSMC (Taiwan Semiconductor Manufacturing) - ADR (TSM US)

TSMC. AI Tailwinds No Match For Macro Headwinds

Fabless inventory issues dampen slope of H2'23 recovery. FY'23 forecast now -10% YoY. TSMC's provides an important read through on the likely...

William Keating

Taiwan Tech Weekly: Japan Semi Restrictions Take Effect; Apple IPhone Volumes; Hon Hai Acquisition

Japan's semiconductor technology export restrictions took effect on Sunday and are unlikely to ease for China any time soon.

Vincent Fernando, CFA

China Technology – Implications of TSMC 2Q23: Slower 3Q and China Recovery

TSMC unveiled an in-line 2Q23 results but guided slow 3Q recovery due to longer inventory correction and China weakness despite stronger AI demand.

CMB International

TSMC: 2023 Guidance Reduction Excuse To Take Profit? Guidance Also Affirmed Long-Term Bullishness

Results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a...

Vincent Fernando, CFA

The Weekly Market Monitor (29) - The Moment of Truth?

The US labor market remains uncomfortably tight, keeping bond yields high, providing massive pressure on overvalued Big Tech stocks to deliver on...

Jeroen Blokland

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