Figure 1. TSMC reported third quarter earnings (Source: TSMC)
In my last article on Seeking Alpha, I highlighted how Taiwan Semiconductor Manufacturing Company (NYSE:TSM) has been winning orders across the mobile and computer sectors with its 7 nm game changer. TSMC has been one of the more under-followed stocks in the semiconductor space (a quick search in Seeking Alpha shows only 32,571 followers. This is a mere fraction of the 235,635 Nvidia (NVDA) followers and 230,836 followers of AMD). Maybe that explains why TSMC is down 6.27% on a year to date basis despite positive news flow while more "exciting" and well followed fabless customers like AMD (+115%) and NVDA (+15%) have been up more. Third quarter results were out last Thursday and what better way for me to spend my weekend than poring over the latest TSMC earnings transcript and updating the valuation of TSMC on my watchlist (so exciting!). In this article, we take a look at some of the key numbers from TSMC's latest earnings and examine the impact of the much awaited 7 nm process on margins and TSMC's competitive strategy in the foundry market.
TSMC Third Quarter Results: A Review
Third quarter revenue in U.S. dollar reached $8.49 billion, which increased 8.1% sequentially, reflecting customers' new product launches using our 7 nanometer and a more favorable foreign exchange rate. Third quarter revenue came in stronger than the revised guidance that considered the impact from the August 3rd virus incident as we were able to make up most of the delay in shipments."
- Lora Ho, TSMC Senior Vice President and Chief Financial Officer, TSMC Earnings Transcript
In the latest earnings release, three things caught my eye on the income statement of TSMC as indication that TSMC strategy at the advanced nodes are working. These are growth
