The global chip shortage is causing a lot of headaches.
Carmakers’ new-vehicle inventories have dropped to record lows in the U.S. as the shortage hampers production amid a surge in vehicle demand. Apple (NASDAQ: AAPL) recently said that lack of chips is crimping sales of its iPads and Macs and could shave $3 to $4 billion off revenue this quarter. Even Caterpillar (NYSE: CAT) said it may not be able to meet demand for machinery used by the construction and mining industries.
But the voracious appetite for chips that’s fueling the shortage has been good news for chipmakers’ revenues, which surged to a record high in the first quarter.
Market research firm TrendForce noted this week that the world’s 10 biggest chip manufacturers rose to a record high of $22.75 billion in the first quarter as demand shot up.
“Owing to soaring demands for various end devices, manufacturers have been ramping up their component procurement activities, and foundry capacities, as a result, have been in shortage since 2020, with various foundries raising their wafer prices and adjusting their product mixes to ensure profitability,” TrendForce analyst Joanne Chiao said.
In the first quarter, Taiwan Semiconductor (NYSE: TSM) maintained its first place position, raking in revenue of $12.9 billion, up 2% from the prior quarter.
“TSMC’s main revenue drivers have been its 7nm and 16/12nm nodes,” Chiao said. “The revenue from the 7nm foundry service has kept climbing at a stable pace thanks to orders from AMD, MediaTek, and Qualcomm, registering a [quarter-over-quarter] increase of 23% for 1Q21.”
But Taiwan Semiconductor isn’t the only chipmaker seeing a boost.
Analog Devices (NASDAQ: ADI) shares jumped mid-May after the company delivered an earnings beat for its fiscal second quarter, posting revenue growth of 26% to $1.66 billion.
“The economic recovery has materialized faster and stronger than initially anticipated, increasing pressure across supply chains globally,” Analog Devices CEO and President Vincent Roche said in the earnings release. “Our decision to strategically invest in additional capacity ahead of this demand inflection has enabled us to move with speed and agility to better serve our customers. These investments combined with continued momentum in bookings give us confidence that our second half will be stronger than the first half.”
“Semiconductors are the bedrock of the modern digital economy and their importance to accelerating digitalization across all industries has never been more apparent,” Roche added.
Applied Materials (NASDAQ: AMAT) saw its revenue jump 41% to $5.58 billion in its second quarter.
CEO Gary Dickerson said the company’s “record performance is underpinned by broad-based strength across our semiconductor businesses. We are confident in our ability to outperform our markets as large, secular trends create sustainable demand for semiconductors and our leadership in materials engineering becomes increasingly critical to deliver new chip technologies.”
“These are really profitable businesses with big moats,” said Paul Wick, lead portfolio manager for Seligman Technology Group at Columbia Threadneedle Investments, which holds Applied Materials in its Columbia Seligman Communications & Information fund. “The customers don’t really change suppliers very often, so incumbency has a lot of value. I think we’re going to see gross margins move up.”