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The technology sector is in an interesting place today. On the one hand, technology has historically tended to be cyclical, with technology demand fluctuating with GDP growth. On the other hand, technology is achieving more extraordinary feats by the day, and is helping to solve a lot of the problems caused by coronavirus. That may actually lead to a surge in demand for some tech products and services due to the stay-at-home economy.

These cross-currents came into focus in the first quarter earnings release of technology bell-weather Taiwan Semiconductor Manufacturing (NYSE:TSM). Taiwan Semi is the world's largest and most advanced outsourced foundry, making chips for tech giants including Apple (NASDAQ:AAPL), Qualcomm (NASDAQ:QCOM), and AMD (NASDAQ:AMD), among many others. Notably, Taiwan Semi leaped ahead of others in its ability to make leading-edge semiconductor chips on the 7nm node, with an eye toward 5nm production later this year.

Apparently, demand for leading-edge chips isn't seeing any slowdown from the COVID-19 outbreak.

Image source: Getty Images.

In the first quarter, Taiwan Semi saw explosive growth over the prior year.

Taiwan Semiconductor Manufacturing (NYSE:TSM)

Q1 2020

Revenue growth

42%

Gross margin

51.8% (+10.5 percentage points)

Net income growth

90.6%

Return on Equity

28.4%

Data source: Taiwan Semiconductor Q1 presentation. Table by author. YOY=year-over-year.

These are eye-popping growth numbers for sure, but don't expect the company to keep growing at this rate for the rest of 2020. The first quarter was lapping the first quarter of 2019, a recessionary quarter for tech due to the U.S.-China trade war. For the second quarter, Taiwan Semi's management basically predicts flat growth quarter over quarter.

Taiwan Semi management also anticipates a slowdown in the second half of this year amid the economic fallout from COVID-19. Management expects the overall semiconductor industry (ex-memory) to be flat to down for the year -- and 2019 wasn't exactly a great year for semiconductors.

However, for Taiwan Semiconductor specifically, the picture is much brighter. Management anticipates foundry growth in the high single digits or low teens this year, and that Taiwan Semi should outgrow even that, in the mid to high teens. That's pretty impressive as the rest of the world goes into recession.

Chalk up Taiwan Semiconductor's success to its lead in manufacturing chips on leading-edge nodes. Leading nodes are the smallest, densest, most advanced chips, with higher power and better battery efficiency. More powerful chips are needed in all the big megatrends today, from 5G communications to artificial intelligence applications in the data center.

For instance, Taiwan Semiconductor gets almost half of its revenue from smartphone chips. You might think this would cause Taiwan Semi's revenue to fall, since it expects smartphone units to decline in the "high single-digits" this year. However, because more and more 5G phones need leading-edge chips, TSM's content growth per smartphone will be over 20%, according to management, meaning overall smartphone revenue for Taiwan Semi should grow in the mid to high teens, even as units decline.

Meanwhile, high-performance computing, Taiwan Semi's other big sector, not only needs leading-edge chips, but is actually seeing a demand surge due to increased cloud use amid work-from-home streaming applications.

Last quarter, smartphones were 49% of TSM sales and high-performance computing was 30%. Leading-edge 7nm nodes made up 35% of revenue, the largest node segment for the company.

Basically, since Taiwan Semi has a lead on other foundries at the leading edge, it won't be nearly as affected as the rest of the semiconductor industry.

When asked about the company's 3.2%dividend on the conference call with analysts, management reiterated that the company will pay its current quarterly divided, with the intention of raising it in the future, and the dividend would not go below the current payout going forward. That's certainly refreshing in an environment when many companies are cutting their dividends instead.

When looking for dividend stocks in the midst of the coronavirus, it's probably best to stick with companies that:

Today, Taiwan Semiconductors fits all three criteria. That's why it's one of the safest dividendsout there, not only in tech, but also the entire market.

Read more here:
For This High-Yield Stock, 5G and Artificial Intelligence Outweigh Coronavirus - The Motley Fool