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GuruFocus has detected 3 Warning Signs with Taiwan Semiconductor Manufacturing Co Ltd \$TSM.
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Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM)
Gross Profit
\$13,557 Mil (TTM As of Sep. 2016)

Taiwan Semiconductor Manufacturing Co Ltd's gross profit for the three months ended in Sep. 2016 was \$4,198 Mil. Taiwan Semiconductor Manufacturing Co Ltd's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$13,557 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Taiwan Semiconductor Manufacturing Co Ltd's gross profit for the three months ended in Sep. 2016 was \$4,198 Mil. Taiwan Semiconductor Manufacturing Co Ltd's revenue for the three months ended in Sep. 2016 was \$8,279 Mil. Therefore, Taiwan Semiconductor Manufacturing Co Ltd's Gross Margin for the quarter that ended in Sep. 2016 was 50.71%.

Taiwan Semiconductor Manufacturing Co Ltd had a gross margin of 50.71% for the quarter that ended in Sep. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Taiwan Semiconductor Manufacturing Co Ltd was 49.52%. The lowest was 42.55%. And the median was 47.66%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Taiwan Semiconductor Manufacturing Co Ltd's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

 Gross Profit (A: Dec. 2015 ) = Revenue - Cost of Goods Sold = 25724.2951465 - 13208.6305485 = 12,516

Taiwan Semiconductor Manufacturing Co Ltd's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = 8278.73684679 - 4080.81119143 = 4,198

Taiwan Semiconductor Manufacturing Co Ltd Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 3016.87757125 (Dec. 2015 ) + 2802.84950625 (Mar. 2016 ) + 3539.75962848 (Jun. 2016 ) + 4197.92565536 (Sep. 2016 ) = \$13,557 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Taiwan Semiconductor Manufacturing Co Ltd's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

 Gross Margin (Q: Sep. 2016 ) = Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 4,198 / 8278.73684679 = 50.71 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Taiwan Semiconductor Manufacturing Co Ltd had a gross margin of 50.71% for the quarter that ended in Sep. 2016 => Durable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Taiwan Semiconductor Manufacturing Co Ltd Annual Data

 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Gross_Profit 4,792 4,392 4,275 4,011 6,925 6,415 8,405 9,466 12,048 12,516

Taiwan Semiconductor Manufacturing Co Ltd Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Gross_Profit 3,041 3,504 3,526 3,481 3,227 3,132 3,017 2,803 3,540 4,198
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