TSMC has recently encountered two major external headwinds.

US policy risks

Not only has it been reported that the White House intends to revoke the exemptions enjoyed by its mainland factories when obtaining American technology, but as the second quarter enters the countdown, the New Taiwan dollar exchange rate has been difficult to reverse the 12% appreciation this quarter, which has hit TSMC's gross profit margin and operating profit margin by nearly 5 percentage points each, seriously eroding profits. This quarter's net profit may be lower than that of the previous quarter, and the market's original expectation of continued profit growth cannot be achieved. Find all kinds of electronics in Easelink.

In addition, the exchange rate has a great impact on TSMC's gross profit margin, which is export-oriented to the US dollar. Analysts originally expected that TSMC's gross profit margin in the second half of the year would challenge the range of 58%. Now, due to the interference of the exchange rate, the estimated range of TSMC's gross profit margin in the second half of the year has been revised down to about 55%. 

In addition, the yield adjustment factor of the initial mass production of 2nm in the second half of the year may also dilute the gross profit margin. Regarding the exchange rate issue, TSMC Chairman Wei Zhejia bluntly stated at the shareholders' meeting in June that exchange rate fluctuations will affect TSMC's gross profit margin and operating profit margin. 

It is expected that every 1% appreciation of the New Taiwan dollar will affect the "double rate" by about 0.4 percentage points, "which is a large number." TSMC can only continue to work hard to maintain its technological leadership and sell "the value it deserves."

Exchange rate shock

The New Taiwan dollar appreciated by 12% this quarter, hitting TSMC's gross profit margin and operating profit margin by nearly 5 percentage points each. Chairman Wei Zhejia pointed out that every 1% appreciation of the exchange rate affects both rates by 0.4 percentage points each. 

Therefore, the legal person lowered the gross profit margin forecast for the second half of the year to about 55%. The exchange rate fluctuations seriously eroded profits, and the net profit for this quarter may be lower than that of the previous quarter.

Profit Outlook

TSMC's US dollar revenue may meet the target this quarter, but the double-digit rate may fall below the lower end of the financial forecast. The profit may be the same as last quarter or even slightly decrease, but it is still better than the same period last year. 

Historical data shows that the probability of profit growth in the second quarter is about 50%. The company will release its financial report at the July earnings conference. The market is focusing on the top management's response strategy to the headwinds.

Source: Content from Economic Daily

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