iPhone 7 chipmaker enjoys record profits in 2016

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A10 Fusion
There's strong demand for the A10 Fusion chip inside iPhone 7.
Photo: Apple

Strong demand for iPhone 7 and iPhone 7 Plus helped chipmaker Taiwan Semiconductor Manufacturing Company achieve record profits for 2016. Not only is TSMC outperforming its rivals, but it now accounts for 16 percent of Taiwan’s entire equity market value.

Before Apple’s latest smartphones made their debut, it was unclear whether they would prove alluring enough to reverse falling iPhone demand. We’ll have to wait to see how successful they’ll be long-term, but for now, iPhone 7 is a huge success.

TSMC’s proportion of the Taiwanese equity market value is the largest recorded in data stretching back 13 years, according to Bloomberg. And not a single analyst recommends selling shares in the A10 Fusion chipmaker right now.

It’s thought TSMC’s net income will surge 30 percent this quarter, with profit climbing 28 percent year-over-year to $3.1 billion. Those figures are even more impressive when you consider the global smartphone market is actually slowing down.

Sandy Mehta, chief executive officer of Value Investment, says Apple and TSMC can thank Samsung — specifically its Galaxy Note 7 disaster — for additional “optimism” in the iPhone 7 that helped TSMC shares reach new heights.

“Valuations are not very high for TSMC, and rising estimates have led to investor optimism. The shares could still have upside,” she added.

Others warn, however, that TSMC is currently riding high on the back of the iPhone 7’s success, and any “hiccup” in iPhone sales this year or next could have a big impact on the company. Long-term deterioration of smartphone growth will also be a hit.

But TSMC is pushing forward. It will soon start mass-producing new chips using a 10-nanometer manufacturing process, which will allow them to become faster and more efficient.