When TSMC announced sales for the month of May, Taiwan media said the figure came in below expectations, but there’s no reason to suspect anything is amiss.
The May figure was NT$112.36 billion, up 19.8 percent over May 2020, yet less than the NT$120 billion media “expected.”
The media went on to point out TSMC will have to report June sales of NT$142.7 billion to NT$151.2 billion in order to meet the second quarter guidance the chip foundry gave at its investors’ conference.
TSMC should have no trouble meeting guidance.
Anyone familiar with accounting knows that deciding when to account for “sales” can be…somewhat of an art. Do you book sales when an order is made? Or when payment is collected? Or when the product is delivered?
Further, how does the finance department account for long term contracts where, in TSMC’s case, a partner company has paid forward as a way to fund an advanced TSMC fab with the latest etching processes, to ensure allocation?
And finally, not all of the decisions are in TSMC’s hands. Some customers dictate when they pay their bills – it can have to do with the size of the company or the product cycle of its device.
Apple, for example, works with hundreds of component suppliers around the world, and the talk is that Apple pays on its own schedule. Since it’s widely considered a stamp of quality to be known as an Apple supplier, and since the orders can be lucrative due to the huge quantity Apple requires, it can afford to set its own schedule. Apple also makes most of its money in the second half of the year due to product launch cycles and holidays. So the company has to carefully manage cash flow.
So there is some art in accounting with regards to when sales are booked.
In the case of TSMC’s monthly revenue, there does not appear to be anything to worry about.
Sales in June, the final month of the second quarter, will very likely fill the gap mentioned above. When you look at last year, sales in June 2020 were NT$120.8 billion, a much higher comparison figure than April or May.
TSMC Consolidated Monthly Revenue
(New Taiwan Dollar NT$ billions) Source: TSMC
Part of the reason for the jump in June is seasonality. The semiconductor industry normally slows in the first quarter after a busy summer and fall – and slower business can extend into April and May. By June, chip fabs are gearing up for new products.
So product cycles dictate busy seasons for chip foundries – the end products chips go into.
This year, semiconductor shortages have kept production lines humming, which is one reason sales are up strongly compared to last year.
June will likely shine for TSMC.
As media noted, TSMC will have to report June sales in the range of NT$142.7 billion to NT$151.2 billion in order to meet the second quarter guidance of NT$366.36 billion to NT$374.88 billion. The guidance figure assumes the New Taiwan dollar exchange rate at NT$28.4 for US$1 dollar.
If TSMC meets its guidance, June will mark an all-time high in monthly sales, and second quarter sales will mark a fourth consecutive quarterly record high.
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