- Profits up on margin strength despite sales miss

- World’s largest contract chipmaker backed by Buffett in November

- Top 2023 pick for Needham analyst Charles Shi

Warren Buffett-backed microchip maker Taiwan Semiconductor Manufacturing Company (2330:TPE), commonly referred to as TSMC, reported better-than-expected fourth-quarter profit on Thursday (12 Jan), aided chiefly by steady demand for chips and advantageous exchange rates, even as its revenue came in slightly below expectations.

TSMC’s earnings per share for the three months to 31 December 2022 was $1.82, up from $1.16 last year, and higher than analyst expectations pitched at $1.78. Revenue came in at $19.9 billion, up from last year’s $15.85 billion, but narrowly missing estimates for $20.4 billion.

TSMC’s share price, as traded on the Taiwanese stock market, nudged 0.4% higher in Asian trade to NT$486.5 (Taiwanese dollars). The New York listed stock, perhaps easier for UK investors to buy and sell, is indicated to open 1.8% higher when Wall Street reopens later today, at $81.78. It trades under the TSM ticker.

The New York listed stock lost about 38% during 2022 as investors turned their backs on growth stocks, falling from $120 at the start of the year.


TSMC, the world’s largest made-to-order chip maker and backed by Warren Buffett in November 2022, logged an improved net profit margin during the quarter, which rose to 47.3% from 37.9% last year. This helped offset slightly lower-than-expected revenues, albeit, within the company’s own guidance.

The company ramped up shipments of its five-nanometre chips during the quarter, with the product now accounting for about 32% of its overall revenue. TSMC, alongside South Korean electronics conglomerate Samsung (005930:KS), are the only chipmakers in the world that manufacture 5nm chips.

The firm is a major supplier for iPhone maker Apple (AAPL:NASDAQ) as well as other chipmakers, including Qualcomm (QCOM:NASDAQ) and NVIDIA (NVDA:NASDAQ). Its shipments to North America made up about 68% of its revenues in 2022.


The company also benefited from a more favourable currency exchange rate in 2022, as the Taiwan dollar tumbled over 20% against the US dollar during the year.

TSMC saw a sharp surge in revenues over the past two years as increased demand for electronics due to Covid and the crypto boom sparked a global chip shortage. While the trend has now reversed, the past two years helped the Taiwanese firm establish its dominance as the maker of some of the most advanced chips in the world.

Needham analyst Charles Shi named TSMC as one of his top stock picks for 2023 with a $110 price target.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJ Bell logo

Issue Date: 12 Jan 2023