Taiwan Semiconductor Manufacturing Company (TSM) will report second quarter results tomorrow morning.
Taiwan Semiconductor is the largest contract semiconductor manufacturer (foundry) in the world that makes semiconductors for a myriad of different companies including Apple (AAPL).
TSMC guided for second quarter revenue of $7.8-7.9 bln, with a gross margin of 47-79% and an operating margin of 35-37%. Revenue guidance assumed an exchange rate of 1 US dollar to 29.20 NT dollars, but the USD/TWD exchange rate was closer to 30 during the quarter, so estimates in dollars are below $7.6 bln.
TSMC reports sales on a monthly basis. Last week, the company reported June sales down 16% to TWD$70.4 mln. Reported revenue from the last three months totals TWD$233.3 billion, up 9% year/year and ~1% above analyst expectations for the quarter.
Analysts expect third quarter revenue to grow 4% year/year and 13-14% quarter/quarter to $8.6 bln.
Last quarter, TSMC missed first quarter estimates and guided second quarter revenue below consensus. Management cited weak demand at the high end of the smart phone market. TSM stock fell 6% but the disappointing news took down shares of Apple (AAPL) by 3% and the entire semiconductor sector (ETF: SMH) to the tune of almost 5% as well. Therefore, tomorrow's report will be an important data point for chip and technology investors alike. Demand should be picking up in the Apple supply chain as it gets ready to unveil its latest iteration of the iPhone in September.
TSMC has a ~$188 bln market cap and trades at ~16x EPS estimates, which is roughly in-line with the average chip stock.