Though CPU chip makers are having a hard time getting out their products due to inventory issues, this hasn’t stopped the profits from rolling in!
Do you ever have a dream where you were fighting?
As an ex-bouncer and current coach for combat athletes (what can I say, I’m a Renaissance man!), fighting has been a part of my life ever since I can remember.
And my whole life, because fighting has been a part of my waking life, it’s somehow squeaked into my subconscious and become a part of my dreaming life as well.
Except there’s a problem…
In my dreams, I can’t fight. Well, that’s not true, I can fight fine. It’s just when I throw punches they happen in slow motion and if they land, they do zero damage as if my fists were made of Jell-O.
It’s a horrifying scenario.
Imagine being able to do a job, but all of a sudden, you can’t do it.
That’s how a LOT of companies are feeling right now as supply chain issues and COVID “red tape” make manufacturing and shipping difficult due to logistics and getting the raw materials needed to make said goods.
And no industry has been hit harder than the semiconductors and all the businesses that are attached to it.
We Need More Chips!
You would think it was just the computer industry that would be hurting due to the lack of semiconductors needed to make the CPU chips that make these machines run.
But you’d be wrong, as everything is run by computers these days – and so this shortage is affecting a large swath of industries.
For example, right now, the price of used cars is going through the roof simply because today’s cars need microchips to function their onboard computers and because they’re in short supply.
Used cars are basically the only choice for some, creating a shortage of vehicles, which creates a supply and demand issue that is sending prices through the roof.
That being said…something WEIRD is going on in the semiconductor world because it seems that two things that would and SHOULD be diametrically opposed are not.
What am I talking about?
As I said, there are issues with chip manufacturers getting the supplies they need to make their wares, that being said, companies aren’t sending out as many chips as the market is asking for.
That being the case, you’d think that profits would be down, right?
Fewer products going out…less money coming in.
Seems simple, right?
Well, you’d be wrong, as the fact of the matter is, some chip companies are experiencing BETTER than expected profits even during these troubling times and investors are getting returns they never dreamed possible.
No Chips? No Problem!!
Taiwan Semiconductor Manufacturing Company (TSM) is one of those companies that is handing out profits like Hari Krishnas used to hand out flowers (is that reference too old?).
The company reported better-than-expected quarterly earnings on Thursday, surprising many shareholders who didn’t think they’d see profits from this stock so soon.
Apple’s (AAPL) biggest chipmaker is now projecting average sales growth of 15% to 20% per year, a number that is DOUBLE its previous prediction.
Not only that, but the company is expecting to see sales of $16.6 billion to $17.2 billion in the 1st quarter of 2022 alone, which is a number that is at least 5% ahead of estimates.
And what makes investors even happier is the fact that the company revealed that it intends to spend up to $44 billion expanding and upgrading capacity over the next 12 months.
Well, probably the fact that TSMC brought in nearly $7 billion in pre-payments in 2021, showing that their customers have faith in the company and their products, which helped the company grow its profit by a new quarterly record in Q4 of a whopping 16%.
This is what is changing things.
And why things are looking up for TSM shareholders.
With a “bullish” score that high, you can see the appeal.
This company may not be delivering chips in record amounts, but they are delivering profits, and for many investors, that’s enough to make them a “strong-buy” in some people’s book.
Now, can you imagine what will happen once the supply chain issues are resolved?
They won’t be punching with fists of Jell-O, they’ll be punching with fists of steel!!
“Success is not measured by what you accomplish, but by the opposition, you have encountered, and the courage with which you have maintained the struggle against overwhelming odds.” – Orison Swett Marden