TSMC sales outlook falls short on stalled demand

By BLOOMBERG

TAIPEI • Taiwan Semiconductor Manufacturing Co Ltd (TSMC) forecast revenue below analysts’ estimates, as the sole supplier of Apple Inc’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 (RM38.9 billion) to US$9.45 billion this quarter, lagging the US$9.55 billion average estimate. That’s during a holiday season that often marks peak sales for customers including Apple, whose latest gadgets went on sale last month. For 2019, Taiwan’s largest company also foresees a possible bump in spending — key to retaining its technological edge — to as much as US$12 billion.

While TSMC remains the exclusive maker of iPhone processors, it’s tackling a smartphone market that’s seeing little growth as customers take longer to replace devices and brands fail to create innovative designs. The world’s biggest contract maker of chips is also feeling the impact of volatility in digital currencies, which hurts demand for the semiconductors used to mine bitcoin and others. And its holiday-quarter forecast may reflect uncertainty around growing US-Chinese trade tensions.

“TSMC may by offering a conservative forecast intentionally due to macroeconomic uncertainties,” said Mark Li, an analyst with Sanford C Bernstein.

TSMC’s mobile phone business should grow in the mid-single digits over the coming five years, CEO CC Wei told reporters yesterday. But the high-performance computing, automotive and Internet of Things segments should expand by double digits during that time as everyday objects become increasingly connected, he added.

“Our second half of 2018 business will be strongly supported by the seven- nanometer rampup, which is mainly driven by a few new smartphone launches, however, our business is also negatively impacted by further weakening of cryptocurrency mining demand,” Wei said.

Net income fell to NT$89.1 billion (RM12.06 billion) in the three months ended September, the Hsinchu, Taiwan- based company said. That compares to 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 chipmakers along with Internet companies from the US to China. The rout was spurred in part by US-Chinese tensions, 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 added.

Yesterday, CFO 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’s intended to sustain TSMC’s upgrade to leading-edge seven-nanometer technology, which speeds processing and saves on power consumption.

However, TSMC executives said that revenue from its most advanced chipmaking processes will account for less than US$1 billion of the company’s total in 2019. That’s a sign that highend customers, which include the likes of Apple, crypto-mining giant Bitmain and Huawei Technologies Co, may not be adopting the technology as quickly as expected after TSMC spent billions rolling it out.