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Taiwan Semi Earnings Spark Chip Stock Gains

A 14% rise in third-quarter profit at foundry giant jolts shares of Broadcom, Applied Materials, Advanced Micro Devices and others.

Shares of chip makers rose Thursday after Taiwan Semiconductor  (TSM) - Get Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR Report, the world's largest contract chipmaker and a key supplier to Apple  (AAPL) - Get Apple Inc. (AAPL) Report, posted stronger-than-expected third-quarter earnings.

Taiwan Semiconductor reported a nearly 14% rise in profit to NT$156.3 billion ($5.56 billion) in the July to September quarter. TSMC's revenue for the quarter climbed 22.6% to $14.8 billion, within the company's prior estimated range of $14.6 billion to $14.9 billion.

The ongoing shortage in supply of semiconductor chips will likely continue into 2022 amid booming demand during the COVID-19 pandemic, the company said.

Broadcom  (AVGO) - Get Broadcom Inc. Report, Nvidia  (NVDA) - Get NVIDIA Corporation Report, Qualcomm  (QCOM) - Get QUALCOMM Incorporated Report, Applied Materials  (AMAT) - Get Applied Materials, Inc. Report and Micron Technology  (MU) - Get Micron Technology, Inc. (MU) Report, among others, all rose in the wake of the report.

Broadcom shares ended up 2.6%, Nvidia jumped 3.85%, Qualcomm gained 2.9%, Applied Materials rose 3%, and Micron shares finished up 2.1% Thursday. Taiwan Semiconductor ADRs rose 2.35% to end at $112.56.

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The semiconductor production shortage that began last year has shown no signs of letting up. Lead times have surged as production constraints have grown, worrying chip investors and consumers about what to expect in the future.

The global shortfall has forced automakers like Ford  (F) - Get Ford Motor Company Report and Tesla  (TSLA) - Get Tesla Inc Report to cut production and hurt manufacturers of smartphones, laptops and consumer appliances including Apple.

The situation grew worse with the pandemic’s latest surge in Southeast Asia, where many key chip and electronics-assembly facilities are based including TSMC.

TSMC has said it plans to build a new factory in Japan to meet long-term demand for chips. The expansion plan in Japan was pending approval from the company's board. It declined to disclose details such as expenditure and capacity, Reuters reported.

TSMC also raised its revenue growth forecast for 2021 to about 24%, versus an earlier forecast of above 20%, citing an "industry megatrend" of strong chip demand.