[Click e-Stock] "Semiconductors Always Rise? ... This Stock Requires Caution Despite Strong Earnings"

Concerns are mounting over the profitability of TSMC, the world’s largest foundry company, with projections now indicating a decline in its gross profit margin.

On April 21, Kiwoom Securities predicted that, despite the continuous improvement and the growth of the artificial intelligence (AI) market, TSMC’s gross profit margin will show a downward trend through 2028 to 2029. This outlook stems from investors’ worries over intensifying foundry competition and declining profitability caused by the operation of overseas factories.

The company’s first-quarter results for this year exceeded expectations. While the projected revenue and operating profit were $35.5 billion and $19.7 billion respectively, actual revenue came in at $35.9 billion and operating profit at $20.8 billion. Notably, thanks to improved utilization rates and cost-saving efforts, the gross profit margin rose by 4 percentage points quarter-on-quarter.

Guidance for the second quarter of this year is also above expectations. The company forecasts revenue of $39.0 billion to $40.2 billion and operating profit of $22.0 billion to $23.5 billion, surpassing the market consensus of $38.1 billion in revenue and $21.0 billion in operating profit. Although there are concerns about demand for PCs and smartphones due to economic uncertainty and a sharp rise in memory prices, robust AI demand and still-limited foundry production capacity are cited as the main reasons for the positive outlook.

However, the outlook for a decline in gross profit margin was not reflected in the second-quarter results guidance. Due to the anticipated drop in profitability, a short-term weakening of the stock price is expected.

Yuak Park, a researcher at Kiwoom Securities, advised, “As the gross profit margin enters a multi-year downtrend, it is prudent to take a conservative approach to TSMC in the short term.”

This content was produced with the assistance of AI translation services.