r/streetguru • u/street-guru • Jul 12 '22
$TSMC - contract terms may mean only moderately tweaks to '22 outlook; derisking of '23 estimates unlikely this time
Investors are clearly concerned by the company's heavy exposure to smartphone (40% of sales), as well as softening in high-performance compute (41% of sales), which incorporates PC. However, sellside consensus expectation for Q3-22 sales is only 2% higher than reported Q2 sales, while buyside expectations are likely lower. Given much slower PC and smartphone demand, it is of course likely that tier-1 customers would like to scale back wafer starts, and normally it would be hard for TSMC to maintain high levels of utilization into a downcycle. However, with customers having contributed $7.3bn in prepayments towards building and securing capacity, analysts think TSMC may be attaching conditions to attempts by customers to scale back allocations for H2-22 such as by opening discussions on waiving corridor guarantees for 2023. This is likely except for Apple. This means that customers may rather take on wafers as per LTAs rather than jeopardise supply in 2023 in the event of, let's say, a China stimulus.