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TSMC Posts Record Q2 Profits, Sees Robust Chip Demand In 2020 Amid 5G Boost

The world's biggest contract chipmaker boosted its third quarter sales forecast Thursday amid what it says will be a 5G-lead rebound for semiconductor sales.

Taiwan Semiconductor Mfg. Co. Ltd.,  (TSM) - Get Taiwan Semiconductor Manufacturing Co. Ltd. Report the world's biggest contract chipmaker and a lead Apple  (AAPL) - Get Apple Inc. Report supplier, posted better-than-expected second quarter profits, while forecasting a rebound in near-term sales, as 5G network buildouts, as well as work-from-home orders, boost global semiconductor demand. 

TSMC said profits for the three months ending in June came in at T$120.8 billion ($4.1 billion), up 81.1% from the same period last year to a record high and firmly ahead of the Refinitiv-collected forecast of $T111.00 billion. 

Group revenues, which TSMC reports in U.S. dollars, rose 34.1% to $10.4 billion, a figure it expects to hit between $11.2 billion and $11.5 billion over the third quarter - a 22% surge from the same period in 2019. Its 2020 revenue forecast was also improved, with the group now seeing a 20% gain on last year, compared to a "mid- to high-teens" percentage gain forecast earlier in the spring. 

"Moving into third quarter 2020, we expect our business to be supported by strong demand for our industry-leading 5-nanometer and 7-nanometer technologies, driven by 5G smartphone and HPC and IoT-related applications," CEO C.C. Wei told investors on a conference call Thursday. "Looking at the second half of this year, COVID-19 continues to bring some level of disruption to the global economies and uncertainty remain."

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"We have observed weak consumer demand in the first half of this year and now expect global smartphone units to decline low teens percentage year-over-year in 2020," Wei added. "However, amid the COVID-19 pandemic, we also observed the supply chain making effort to ensure supply chain security and actively preparing new 5G smartphone launches. We raised our forecast for 5G smartphone penetration rate to high-teens percentage of the total smartphone market in 2020."  

TSMC's U.S.-listed shares were marked 2.4% lower in early New York trading Thursday to change hands at $64.50 each, a move that would trim the stock's year-to-date gain to around 13%. Apple shares, meanwhile, were seen 0.82% lower at $387.73 each.

The Taiwan-based tech group's second half outlook echoes a similarly bullish assessment yesterday from semiconductor supplier ASML Holding NV  (ASML) - Get ASML Holding NV Report ,which posted modestly weaker-than-expected second quarter earnings but issued a near-term forecast that suggest global chip demand will remain solid as work-from-home dynamics increase in the wake of the COVID-19 pandemic.

ASML said it sees third quarter revenues rising to around €3.7 billion, with a gross margin of 48% as customer demand for its extreme ultraviolet lithography systems, or EUV, machines, which design complex chips used by, sector titans such as Samsung Electronics , Intel Corp.  (INTC) - Get Intel Corporation Report and TSMC and cost as much as €100 million each, increases.