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Friday, July 19, 2019

TSMC’s solid results shows resilience in trade dispute

Friday, 19 Jul 2019

Wei: We have passed the bottom of the cycle of our business, and should see our demand increase. — Bloomberg

TAIPEI: Taiwan Semiconductor Manufacturing Co (TSMC) projected current-quarter revenue ahead of estimates, as the Apple Inc supplier shrugs off a smartphone slump and US sanctions on Huawei Technologies Co to ride demand for cutting-edge chips.

The world’s largest contract chipmaker expects sales of US$9.1bil to US$9.2bil in the September quarter, ahead of average projections for about US$8.9bil.

The Taiwanese company earlier reported a fall in June-quarter net income to NT$66.8bil (US$2.1 billion), surpassing the NT$65.7bil estimated.

TSMC’s solid outlook may allay fears of a persistent global chip downturn as Washington and Beijing clash.

Its technological edge in chipmaking may help it grab an outsized portion of demand for advanced high-performance semiconductors, particularly as countries roll out ultra-fast fifth generation wireless networks. TSMC’s business has bottomed and should begin to rebound, chief executive officer C. C. Wei said.

“We have passed the bottom of the cycle of our business, and should see our demand increase,” he told reporters here yesterday. “We see very, very strong demand” in the second half of 2019.

Orders for crypto-mining gear are expected to help TSMC’s third-quarter sales, according to Morgan Stanley, which recently lifted its target price on the stock by 9%.

The typical year-end ramp up of iPhone manufacturing and a new chip-product cycle from Advanced Micro Devices Inc. could also buoy the top line.

“The guidance shows that management is confident on the recovery of demand in 2H, possibly boosted by new orders from AMD,” Bloomberg Intelligence Charles Shum said. “And, we expect the gross margin can return to 50%” by the fourth quarter.

TSMC and its industry peers are grappling with a plateauing smartphone market, efforts by top customer Apple to move beyond hardware, and US tech-export curbs that have hammered No. 2 customer Huawei.

It previously reported a 4.5% slide in first-half revenue – its worst January-to-June performance since 2011.

As the world’s largest player in the business of made-to-order chips, TSMC is a barometer for the broader industry as well as Apple, which accounts for about a fifth of its revenue.

Its better-than-projected outlook underscores expectations the industry is bottoming out after a dismal few years, when consumers took longer to replace their smartphones and Bitcoin prices collapsed.

The company however signalled its intention to invest for the future, saying its annual spending on capacity and upgrades could exceed US$11bil this year.

TSMC’s shares stood largely unchanged before the announcement and have gained more than 12% this year. — Bloomberg


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