Strong demand for consumer electronics and an increase in prices due to tight supply have helped chipmakers perform well over the past year, and their momentum is set to remain strong in the coming months. Analysts expect semiconductor sales to cross $600 billion for the first time this year. Semiconductor companies are investing significantly in capacity expansion and product-mix improvement to meet the rising demand.
However, the stock market had a rough start to this year, with the S&P 500 and the Nasdaq Composite in January posting their worst month since the onset of the pandemic on investors’ concerns over expected interest rate hikes.
Furthermore, the SPDR S&P Semiconductor ETF (XSD) slumped 15.9% in January. But semiconductor stocks, Taiwan Semiconductor Manufacturing Company Limited (TSM), Daqo New Energy Corp. (DQ), and NeoPhotonics Corporation (NPTN) outperformed the broader market and were the top performers in the industry last month.
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Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in HsinChu, Taiwan, TSM manufactures and sells integrated circuits and semiconductors worldwide. It also offers customer service, account management, and engineering services.
Last December, TSM announced its first HPC-focused technology offering–N4X process technology–to address the demanding workloads of high-performance computing (HPC) products. HPC is now TSM’s fastest-growing business segment, and this new technology aims to offer a performance boost.
And last November, TSM and MediaTek unveiled the world’s first 7-nanometer 8K digital TV flagship system-on-chip (SoC), the MediaTek Pentonic 2000. “By adopting TSMC’s N7 process, MediaTek is bringing technology capable of supercomputing applications into the living room to give consumers the next generation of media experiences,” said Dr. Kevin Zhang, senior vice president of Business Development at TSM.
TSM’s net revenue increased 21.2% year-over-year to NT$438.19 billion ($15.74 billion) in its fiscal fourth quarter, ended Dec. 31. Its income from operations grew 16.3% from its year-ago value to NT$182.77 billion ($6.56 billion). Its comprehensive income improved 28.7% year-over-year to NT$163.70 billion ($5.88 billion). And its earnings per ADR increased 16.4% from its year-ago value to NT$32.05 ($1.15).
The Street expects the company’s revenue to increase 31.7% year-over-year to $16.84 billion in its fiscal first quarter, ending March 2022. The $1.28 consensus EPS estimate indicates a 33.4% rise year-over-year. Also, TSM beat the Street’s EPS estimates in each of the trailing four quarters, which is impressive. TSM shares gained 1.8% in price in January.
Daqo New Energy Corp. (DQ)
Headquartered in Shanghai, China, DQ, and its subsidiaries manufacture and sell polysilicon to photovoltaic product manufacturers in the People’s Republic of China. It offers ready-to-use polysilicon and is packaged to meet crucible stacking, pulling, and solidification products.
Last month, DQ announced that its subsidiary Xinjiang Daqo had obtained energy consumption approval for its polysilicon projects in Baotou, in China’s Inner Mongolia autonomous region. Construction is expected to begin t in the first quarter of 2022 and be completed in the second quarter of 2023. This project should help significantly increase our production capacity and expand its market share.
On Dec. 6, 2021, DQ began a pilot production at its new 35,000 MT Phase 4B polysilicon production facility and expects to ramp-up to full capacity with a total annual production capacity of 105,000 MT by the end of March 2022. The company further expects to expand its production capacity to 270,000 MT by the end of 2024 to meet the world’s urgent need for cost-effective, clean, non-carbon energy generation.
DQ’s revenues increased 366.7% year-over-year to $585.78 million in its fiscal third quarter, ended September 30. Its income from operations grew 1,165.3% from its year-ago value to $421.72 million, while its adjusted net income improved 1,067.8% year-over-year to $294.69 million. Its adjusted earnings per ADS increased 1,063.6% from its year-ago value to $3.84.
The $550.72 million consensus revenue estimate for the fiscal fourth quarter, ended December 2021 indicates a 122.3% increase year-over-year. The $2.34 consensus EPS estimate reflects a 143.8% rise year-over-year in the same period. The stock was down just 0.5% in price January.
NeoPhotonics Corporation (NPTN)
San Jose, Calif.-based NPTN develops, manufactures, and sells optoelectronic products that transmit and receive high-speed digital optical signals for cloud and hyperscale data center internet content providers and telecom networks worldwide.
This month, NPTN announced its stockholders’ approval to merge with Lumentum Holdings Inc. (LITE), a laser and optical fiber developer. The transaction is expected to close in the second half of 2022. “The increasing global demand for our ultrapure light tunable lasers and photonics technologies for speed over distance applications is more apparent than ever, and Lumentum is the ideal partner to serve our customers on a larger scale,” said Tim Jenks, NeoPhotonics president, CEO, and chairman.
NPTN’s loss from operations declined 47.7% year-over-year to $1.33 million in its fiscal third quarter, ended September 30. Its net loss decreased 62.1% from its year-ago value to $1.86 million.
Analysts expect the company’s revenue to increase 42.4% year-over-year to $97.14 million for its fiscal fourth quarter, ended December 2021. The consensus EPS estimate is $0.06.
NPTN shares declined just 0.1% in price in January.
Click here to checkout our Semiconductor Industry Report for 2022
TSM shares were trading at $125.01 per share on Wednesday afternoon, up $1.30 (+1.05%). Year-to-date, TSM has gained 3.91%, versus a -3.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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