Taiwan Semiconductor Manufacturing Co (TSMC) forecast revenue sharply below analysts’ estimates, as the sole supplier of Apple’s iPhone processors grapples with a stalling global smartphone market.
TSMC, which is also struggling with a slowdown in cryptocurrency mining demand, is expecting sales of US$9.35 billion to US$9.45 billion this quarter, short of the US$9.55 billion average estimate.
Its forecast covers a holiday season that often marks peak sales for customers including Apple, whose latest smartphones went on sale last month.
While TSMC remains the exclusive maker of iPhone processors, it is coming up against a global smartphone market that is seeing little growth, as customers take longer to replace their devices and brands fail to come up with innovative designs.
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The world’s biggest contract maker of chips is also feeling the impact of volatility in digital currencies that is hurting demand for semiconductors used to mine bitcoin and other cryptocurrencies.
“The street remains overly bullish on TSMC’s outlook for the near term as the street’s forecasts may have yet to capture the weakness in demand” for chips using older technologies, Stefan Chang, an analyst at brokerage firm Maybank Kim Eng, wrote in an October 8 research note.
Executives at TSMC – a bellwether for the chip industry as well as an early barometer of iPhone demand – have said they expect demand for premium devices to help offset the cryptocurrency sector’s lethargy in the second half. In July, TSMC chief executive C C Wei lowered 2018 sales predictions to a high single-digit percentage growth in US dollar terms, down from an already reduced projection of 10 per cent. Then in August, a computer virus shut several of its plants for days.
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TSMC’s smartphone business should grow in the mid-single digits over the coming five years, Wei told reporters on Thursday. But the high-performance computing, automotive and internet of things segments should expand by double-digits during that time, as real-world objects become increasingly connected, he said.
Net income fell to NT$89.1 billion (US$2.9 billion) in the three months ended September, the Hsinchu, Taiwan-based company said on Thursday. That compares with the NT$88.75 billion that analysts had expected. Previously reported sales for the September quarter were NT$260.3 billion.
TSMC has held up well during the recent sell-off of technology stocks, which hammered chip makers along with internet companies from the US to China.
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The rout was spurred in part by fears that growing US-China tensions will depress global growth, but Wei told reporters he saw no short-term impact on his company. In the long run, any impact on TSMC would be minimised because its customers were diverse and spanned the globe, he said.
On Thursday, chief financial officer Lora Ho said the company will earmark US$10 billion to US$12 billion annually for capital expenditure from 2019 onwards, from around US$10 billion this year. That is intended to sustain TSMC’s upgrade to leading-edge 7-nanometre technology, which speeds processing and saves on power consumption.
Shares of TSMC were little changed before the earnings were released and have risen about 3 per cent this year.