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Chip revenues surge on global shortage

As electronics manufacturers struggle to secure vital components, semiconductor foundries have shifted up a gear to operate at maximum capacity; yet they are still unable to fully meet skyrocketing demand.

From newly remote companies deploying laptops, to consumers buying tablets and game consoles, pandemic-induced digital transformation has created a bottomless appetite for chips across multiple end markets – and one that is now beginning to be reflected in semiconductor company balance sheets.

The combined quarterly total revenue of the top ten chip foundries rose to a record high of $22.75 billion in the first quarter of 2021, according to TrendForce. This was caused by firms hiking prices in response to tight capacity and tweaking their product production mixes for maximal profitability.

Taiwan Semiconductor Manufacturing Corp (TSMC), the world’s largest contract chipmaker, generated 57% of the world’s total chip foundry revenues in the last quarter. Revenues at the behemoth climbed to $12.9 billion, up 2% from a year earlier. 7nm production provided most of the profit, driven by steadily increasing demand from AMD, MediaTek, and Qualcomm among others. Sales of TSMC’s innovative 5nm chips on the other hand actually dropped as Apple “entered the off-season” for device production.

Rival Samsung saw its foundry revenue drop 2% in the last quarter to $4.1 billion, with production in Texas momentarily grinding to a halt in February as a freak winter storm caused power outages. But, the firm has said it expects chip profits to rise in the second quarter as the global shortage persists.

Rising revenues and robust balance sheets could be construed as bullish for the semiconductor mergers and acquisitions market, particularly given recent government initiatives to pump billions of dollars into securing local supply chains. But after a bumper year for chip acquisitions in 2020, the big players may have already made their key moves, and as Acuity Partner Matthew Byatt points out, surging demand could put deal-making on the backburner:

“The current surge in demand is helping semiconductor companies build strong balance sheets for M&A. Yet, with the entire sector under strain, companies do not have the bandwidth to focus on acquisitions in the short term.”

Matthew Byatt | Managing Partner

Matthew is a Co-Founder and Managing Partner at Acuity and leads the Acuity Advisors’ Deeptech practice.

Matthew has held senior leadership and corporate finance positions with some of the UK’s most successful and influential technology and consultancy companies. Roles with ARM, McKinsey and Cadence have given Matthew an exceptional insight into the world’s most successful businesses and a number of the UK’s eminent start-ups, underpinning his success at Acuity.

Matthew has considerable experience across a broad range of technology sectors throughout the UK, US and Asia, ranging from nanotechnology, semiconductor and cleantech to digital media and internet businesses. It’s experience that has given him a robust, well-developed and international network. Having also run and successfully exited his own business, Matthew has a deep understanding of the financial and emotional aspects of this demanding process, bringing a unique and authoritative perspective to each business sale.

One of Matthew’s strengths is understanding complex technical value propositions, one of the benefits of training as an electronic engineer. He gets to the heart of what drives a company’s value and communicates this persuasively to potential buyers and investors. Matthew understands a buyer’s motivation intuitively and delivers a compelling rationale for why a business sale should be of strategic interest. His insight consistently yields higher deal values and results in great successes for his clients.

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