Daily Brief: The Wait For Chips Might Be Long, But TSMC’s Profit Is Right On Time

Daily Brief: The Wait For Chips Might Be Long, But TSMC’s Profit Is Right On Time

about 2 years ago3 mins

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TSMC reported better-than-expected quarterly earnings on Thursday, and investors might’ve been surprised to see them arrive when the chipmaker said they would…

What does this mean?

Chipmakers would be lucky to get any downtime these days: demand for semiconductors used in everything from smartphones to cars kept soaring last quarter, with some desperate customers resorting to upfront payments to bag their stash. That might be why TSMC earned nearly $7 billion in pre-payments alone last year, helping the company grow its profit by a better-than-expected 16% last quarter – enough to hit a new quarterly record. It reckons it can keep up this relentless work ethic too: TSMC thinks its sales will grow between 15% and 20% a year going forward – as much as doubling its last forecast.

TSMC profit

Why should I care?

Zooming in: TSMC’s splashing the cash.

Those results solidify TSMC’s title as the world’s biggest contract chipmaker, but it’s not letting its guard down: the company also announced plans to spend as much as $44 billion in 2022 – up from last year’s $30 billion, and more than rival Intel’s paltry $28 billion budget. TSMC will use that money to build new plants in places like Japan and the US, in an effort to up production and stay ahead of the competition.

The bigger picture: Carmakers are going it alone.

That extra production should help ease shortages, but not necessarily anytime soon: the wait between ordering chips and delivering them rose 30% last month to 26 weeks – the longest on record. And carmakers – which lost $200 billion in sales because of the chip shortage last year – are tired of waiting: Tesla and General Motors have already said they’re going to develop their own chips instead, and one research firm reckons half of the world’s ten biggest carmakers will be doing the same by 2025.

Chip wait time

Keep reading for our next story...

Delta Air Lines' Quarterly Results Came In Ahead Of Expectations

Delta image

Delta Air Lines reported better-than-expected results on Thursday, even as the pandemic forces the US carrier to fight to the bitter end.

What does this mean?

Delta had a lot on its plate at the end of last year: the company paid through the nose for fuel on the back of surging oil prices, all while still going toe to toe with Covid. The fact it posted a loss for the quarter, then, mightn’t have come as a shock to investors. Nor might the airline’s admission that it’s expecting to report a loss this quarter, given the inevitable impact of Omicron on travel demand.

But all credit to Delta: the company still managed to bank its highest revenue last quarter since late 2019, thanks to impressive vacation and business bookings. Its profit for the whole of 2021 came in at $280 million too – a far cry from the $12.4 billion loss it made in 2020. Delta’s even confident that Omicron cases will recede quickly this quarter, and that demand will pick back up from mid-February.

Delta stock
Source: Google Finance

Why should I care?

For markets: Could’ve been much worse.

Pay attention to Delta’s update: more major US airlines are reporting soon, and they’ll likewise have been impacted by Omicron. After all, around 11,000 flights were canceled in the last 13 days of December. But take heart: investors seemed to expect the variant to erode Delta’s bottom line much more than it did, which might be why they sent rivals United Airlines and American Airlines’ stocks up 5% and 6% respectively.

Flights canceled

Zooming out: Microsoft turns to the bottle.

Delta’s not the only company with fuel on the brain: Microsoft announced plans on Thursday to invest $50 million in sustainable fuel company LanzaJet’s alcohol-to-jet fuel biorefinery. That’s a very long-term speculation: renewable aviation fuel is estimated to account for less than 0.1% of global jet fuel demand.

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