TSMC’s quarterly profit meets forecasts with 0.7% increase

Taipei. TAIWAN Semiconductor Manufacturing Co Ltd (TSMC) posted on Thursday a quarterly net profit that met market expectations, amid fears that …

Taipei

TAIWAN Semiconductor Manufacturing Co Ltd (TSMC) posted on Thursday a quarterly net profit that met market expectations, amid fears that sluggish demand for smartphones could hurt the world’s largest contract chipmaker’s bottom line.

The results of TSMC, whose clients include Apple, are being keenly watched after chip suppliers including Samsung Electronics recently flagged weak demand. Tech giant Apple also slashed its sales forecast due to slowing smartphone sales in China.

TSMC, which is also a key supplier for Qualcomm and Huawei Technologies, posted a net profit of NT$99.98 billion (S$4.4 billion) for the quarter ended December, 0.7 per cent higher than a year ago.

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That is roughly in line with the NT$98.94 billion average forecast drawn from 22 analysts, according to Refinitiv data.

Revenue rose 10.7 per cent from the previous quarter and 2 per cent from the same period of the previous year to US$9.4 billion.

That compared with the company’s own estimate of US$9.35-9.45 billion and the average US$9.37 billion estimate of 23 analysts polled by Refinitiv.

Analysts said sluggish global smartphone sales, whose chips have powered TSMC for a decade, would partially offset growth from TSMC’s leading position in the latest generation of chip-making technology.

“TSMC is another victim of weak iPhone demand and crypto bubble, and the gains through other customers just barely offset that,” Mark Li, an analyst at Sanford C. Bernstein, wrote in a note earlier this month.

“Weak iPhone and smartphone is a stiffer headwind and we’re turning more cautious on TSMC’s outlook this year,” he said.

Smartphones would continue to account for 40 to 50 per cent of TSMC’s revenue, company chairman Mark Liu told Reuters in an interview last year.

Some, however, remained optimistic on TSMC’s dominance in high-performance chips and expected the company to further capture market share in advanced areas such as 7nm manufacturing technology – which packs more transistors on smaller and more power-efficient chips. REUTERS

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TSMC’s quarterly profit meets forecasts with 0.7% increase

Taipei. TAIWAN Semiconductor Manufacturing Co Ltd (TSMC) posted on Thursday a quarterly net profit that met market expectations, amid fears that …

Taipei

TAIWAN Semiconductor Manufacturing Co Ltd (TSMC) posted on Thursday a quarterly net profit that met market expectations, amid fears that sluggish demand for smartphones could hurt the world’s largest contract chipmaker’s bottom line.

The results of TSMC, whose clients include Apple, are being keenly watched after chip suppliers including Samsung Electronics recently flagged weak demand. Tech giant Apple also slashed its sales forecast due to slowing smartphone sales in China.

TSMC, which is also a key supplier for Qualcomm and Huawei Technologies, posted a net profit of NT$99.98 billion (S$4.4 billion) for the quarter ended December, 0.7 per cent higher than a year ago.

sentifi.com

Market voices on:

That is roughly in line with the NT$98.94 billion average forecast drawn from 22 analysts, according to Refinitiv data.

Revenue rose 10.7 per cent from the previous quarter and 2 per cent from the same period of the previous year to US$9.4 billion.

That compared with the company’s own estimate of US$9.35-9.45 billion and the average US$9.37 billion estimate of 23 analysts polled by Refinitiv.

Analysts said sluggish global smartphone sales, whose chips have powered TSMC for a decade, would partially offset growth from TSMC’s leading position in the latest generation of chip-making technology.

“TSMC is another victim of weak iPhone demand and crypto bubble, and the gains through other customers just barely offset that,” Mark Li, an analyst at Sanford C. Bernstein, wrote in a note earlier this month.

“Weak iPhone and smartphone is a stiffer headwind and we’re turning more cautious on TSMC’s outlook this year,” he said.

Smartphones would continue to account for 40 to 50 per cent of TSMC’s revenue, company chairman Mark Liu told Reuters in an interview last year.

Some, however, remained optimistic on TSMC’s dominance in high-performance chips and expected the company to further capture market share in advanced areas such as 7nm manufacturing technology – which packs more transistors on smaller and more power-efficient chips. REUTERS

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Takeaways for Apple, Intel and Others from Taiwan Semi’s Earnings and Guidance

On Thursday morning, TSMC, easily the world’s biggest chip contract manufacturer (foundry), reported Q4 revenue of NT$289.77 billion (up 4% …

Though soft demand from Apple (AAPL) and others is set to weigh heavily on Taiwan Semiconductor’s (TSM) first-half sales, for now markets are judging the chip giant’s outlook to be better than feared.

On Thursday morning, TSMC, easily the world’s biggest chip contract manufacturer (foundry), reported Q4 revenue of NT$289.77 billion (up 4% annually and equal to $9.39 billion) and EPS of $0.63. Revenue was already known thanks to monthly sales reports; EPS beat a $0.62 consensus.

More importantly, for the seasonally softer first quarter, TSMC guided for revenue of $7.3 billion to $7.4 billion. That represents a 13% annual decline at the midpoint and is below a consensus of $8.05 billion.

For the whole of 2019, TSMC — citing a “slowing economic environment” — now expects its revenue will only “grow slightly.” The pre-earnings consensus was for revenue to grow about 6% in dollars.

Nonetheless, after opening lower, TSMC’s shares are currently up 2.1% in Thursday trading to $36.40, amid a 0.9% gain for the Nasdaq. The Philadelphia Semiconductor Index is also up 0.9%.

Here are some notable takeaways from TSMC’s earnings report and call.

1. Customer Inventories Are Elevated — And Not Just for Smartphones

iPhone sales pressures clearly have a lot to do with TSMC’s outlook; TSMC manufactures Apple’s A-series processors and other Apple silicon, as well as chips for iPhone suppliers such as Broadcom (AVGO) and Cirrus Logic (CRUS) . And on its call, TSMC said that “recent changes” in business conditions for the high-end smartphone market will yield a “substantial cutback” in the utilization rate for its 7-nanometer (7nm) manufacturing process, which is used to make Apple’s A12 Bionic system-on-chip (SoC) and (in lower volumes) Huawei’s Kirin 980 SoC.

Chairman Mark Liu later suggested that there’s “quite a lot” of supply chain inventory related to high-end smartphones, and that there was a “sudden” drop in Q1 orders from the space.

There appear to be pressures in other markets as well, however. CFO Lora Ho stated the semiconductor industry’s total inventory exiting 2018 was “at a much higher level than seasonal.” Later, Liu suggested industry inventory levels were about 10 days higher above seasonal norms exiting 2018.

Apple is a holding in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.

2. TSMC Is Being Cautious with its 2019 Capital Spending Plans

Last July, citing a “schedule adjustment” and “efficiency gains,” TSMC cut its 2018 capex budget to a range of $10 billion to $10.5 billion from a range of $11 billion to $12 billion (capex ultimately totaled $10.5 billion). But in spite of its restrained 2018 spending, TSMC, citing its current macro outlook, is only guiding for 2019 capex of $10 billion to $11 billion.

Research firm Semiconductor Advisors sees this outlook as bad news for Applied Materials (AMAT) , and to a lesser extent for KLA-Tencor (KLAC) and ASML (ASML) . Like TSMC, chip equipment makers have priced in a lot of bad news already, and most are ticking higher in Thursday trading.

3. TSMC Still Expects Its Mobile Chip Sales to Grow in 2019

In spite of its iPhone woes and broader weakness in smartphone unit sales, TSMC expects its mobile chip sales to see modest growth this year. A second-half pickup in demand (aided by new iPhone launches) is expected to help, but so is growth in the silicon content found within the average high-end smartphone.

Notably, though 5G’s ramp is still in its early stages, CEO C.C. Wei said that the RF complexity of 5G phones, which will need to support high-frequency mmWave spectrum in addition to traditional mobile spectrum bands, is one of the factors driving this content increase. Skyworks (SWKS) , Qorvo (QRVO) , Broadcom (AVGO) and Qualcomm (QCOM) have all been quite upbeat about 5G’s ability to help them grow their RF chip sales.

4. TSMC Is Maintaining its Long-Term Revenue Forecast

On the call, TSMC said it still expects to grow its revenue at a 5% to 10% compound annual rate from 2017 through 2021. In addition to rising smartphone chip content, the company also remained upbeat about its growth opportunities in what it calls high-performance computing (a catch-all phrase meant to cover a number of GPU and data center opportunities), as well as in automotive and IoT end-markets.

5. TSMC Is Intent on Keeping its Recently-Won Manufacturing Tech Lead

TSMC’s 7nm production ramp during the second half of 2018 gave it a manufacturing process lead against Intel (INTC) , which only expects PCs featuring CPUs based on its delayed 10nm process (seen as competitive with TSMC’s 7nm process) to start shipping in volume during the 2019 holiday season. It also gave TSMC a leg up against foundry rivals such as Samsung (SSNLF) and Globalfoundries; in October, Globalfoundries threw in the towel on trying to keep up with TSMC’s leading-edge process nodes.

The company’s earnings call remarks made it clear that (in spite of a cautious 2019 capex budget) it plans to keep pushing the envelope when it comes to manufacturing technology. A 7nm+ process that delivers moderate performance and power consumption improvements relative to standard 7nm is due to enter volume production in Q2, and its next-gen 5nm process is forecast to enter volume production during the first half of 2020.

Look for Apple to use the 7nm+ process to make the processors going inside of its 2019 iPhones, and the 5nm process to make the ones going into its 2020 iPhones. Other marquee TSMC clients such as Nvidia (NVDA) , AMD (AMD) , Qualcomm and MediaTek also have to be pleased with its manufacturing aggressiveness and execution.

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Takeaways for Apple, Intel and Others from Taiwan Semi’s Earnings and Guidance

On Thursday morning, TSMC, easily the world’s biggest chip contract manufacturer (foundry), reported Q4 revenue of NT$289.77 billion (up 4% …

Though soft demand from Apple (AAPL) and others is set to weigh heavily on Taiwan Semiconductor’s (TSM) first-half sales, for now markets are judging the chip giant’s outlook to be better than feared.

On Thursday morning, TSMC, easily the world’s biggest chip contract manufacturer (foundry), reported Q4 revenue of NT$289.77 billion (up 4% annually and equal to $9.39 billion) and EPS of $0.63. Revenue was already known thanks to monthly sales reports; EPS beat a $0.62 consensus.

More importantly, for the seasonally softer first quarter, TSMC guided for revenue of $7.3 billion to $7.4 billion. That represents a 13% annual decline at the midpoint and is below a consensus of $8.05 billion.

For the whole of 2019, TSMC — citing a “slowing economic environment” — now expects its revenue will only “grow slightly.” The pre-earnings consensus was for revenue to grow about 6% in dollars.

Nonetheless, after opening lower, TSMC’s shares are currently up 2.1% in Thursday trading to $36.40, amid a 0.9% gain for the Nasdaq. The Philadelphia Semiconductor Index is also up 0.9%.

Here are some notable takeaways from TSMC’s earnings report and call.

1. Customer Inventories Are Elevated — And Not Just for Smartphones

iPhone sales pressures clearly have a lot to do with TSMC’s outlook; TSMC manufactures Apple’s A-series processors and other Apple silicon, as well as chips for iPhone suppliers such as Broadcom (AVGO) and Cirrus Logic (CRUS) . And on its call, TSMC said that “recent changes” in business conditions for the high-end smartphone market will yield a “substantial cutback” in the utilization rate for its 7-nanometer (7nm) manufacturing process, which is used to make Apple’s A12 Bionic system-on-chip (SoC) and (in lower volumes) Huawei’s Kirin 980 SoC.

Chairman Mark Liu later suggested that there’s “quite a lot” of supply chain inventory related to high-end smartphones, and that there was a “sudden” drop in Q1 orders from the space.

There appear to be pressures in other markets as well, however. CFO Lora Ho stated the semiconductor industry’s total inventory exiting 2018 was “at a much higher level than seasonal.” Later, Liu suggested industry inventory levels were about 10 days higher above seasonal norms exiting 2018.

Apple is a holding in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.

2. TSMC Is Being Cautious with its 2019 Capital Spending Plans

Last July, citing a “schedule adjustment” and “efficiency gains,” TSMC cut its 2018 capex budget to a range of $10 billion to $10.5 billion from a range of $11 billion to $12 billion (capex ultimately totaled $10.5 billion). But in spite of its restrained 2018 spending, TSMC, citing its current macro outlook, is only guiding for 2019 capex of $10 billion to $11 billion.

Research firm Semiconductor Advisors sees this outlook as bad news for Applied Materials (AMAT) , and to a lesser extent for KLA-Tencor (KLAC) and ASML (ASML) . Like TSMC, chip equipment makers have priced in a lot of bad news already, and most are ticking higher in Thursday trading.

3. TSMC Still Expects Its Mobile Chip Sales to Grow in 2019

In spite of its iPhone woes and broader weakness in smartphone unit sales, TSMC expects its mobile chip sales to see modest growth this year. A second-half pickup in demand (aided by new iPhone launches) is expected to help, but so is growth in the silicon content found within the average high-end smartphone.

Notably, though 5G’s ramp is still in its early stages, CEO C.C. Wei said that the RF complexity of 5G phones, which will need to support high-frequency mmWave spectrum in addition to traditional mobile spectrum bands, is one of the factors driving this content increase. Skyworks (SWKS) , Qorvo (QRVO) , Broadcom (AVGO) and Qualcomm (QCOM) have all been quite upbeat about 5G’s ability to help them grow their RF chip sales.

4. TSMC Is Maintaining its Long-Term Revenue Forecast

On the call, TSMC said it still expects to grow its revenue at a 5% to 10% compound annual rate from 2017 through 2021. In addition to rising smartphone chip content, the company also remained upbeat about its growth opportunities in what it calls high-performance computing (a catch-all phrase meant to cover a number of GPU and data center opportunities), as well as in automotive and IoT end-markets.

5. TSMC Is Intent on Keeping its Recently-Won Manufacturing Tech Lead

TSMC’s 7nm production ramp during the second half of 2018 gave it a manufacturing process lead against Intel (INTC) , which only expects PCs featuring CPUs based on its delayed 10nm process (seen as competitive with TSMC’s 7nm process) to start shipping in volume during the 2019 holiday season. It also gave TSMC a leg up against foundry rivals such as Samsung (SSNLF) and Globalfoundries; in October, Globalfoundries threw in the towel on trying to keep up with TSMC’s leading-edge process nodes.

The company’s earnings call remarks made it clear that (in spite of a cautious 2019 capex budget) it plans to keep pushing the envelope when it comes to manufacturing technology. A 7nm+ process that delivers moderate performance and power consumption improvements relative to standard 7nm is due to enter volume production in Q2, and its next-gen 5nm process is forecast to enter volume production during the first half of 2020.

Look for Apple to use the 7nm+ process to make the processors going inside of its 2019 iPhones, and the 5nm process to make the ones going into its 2020 iPhones. Other marquee TSMC clients such as Nvidia (NVDA) , AMD (AMD) , Qualcomm and MediaTek also have to be pleased with its manufacturing aggressiveness and execution.

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iPhone Chipmaker TSMC Forecasts its Biggest Sales Drop in 10 Years

On Thursday, the world’s largest contract chipmaker and a major supplier for Apple, Taiwan Semiconductor Manufacturing Co. (TSMC), published its …
Image from Shutterstock

On Thursday, the world’s largest contract chipmaker and a major supplier for Apple, Taiwan Semiconductor Manufacturing Co. (TSMC), published its Q4 2018 earnings which has raiseed further concerns over slowing iPhone sales.

According to The Street, the weak results raised even more concerns about the state of iPhone sales, especially after the chipmaker forewarned that its near-term sales would experience its most substantial plunge10 years.

Slowing Smartphone Demand is to Blame, Again

Besides sharply falling global demand for smartphones has also been falling sharply. Coupled with the excess inventory across the supply chain and a slowing global economy, has put much pressure over chip manufacturers, including Samsung Electronics.

Lora Ho, CFO at TSMC said in a statement:

“Moving into first quarter 2019, we anticipate our business will be dampened by the overall weakening of the macroeconomic outlook, mobile product seasonality, and high levels of inventory in the semiconductor supply chain.”

According to TSMC’s chairman, Mark Liu, the decline in premium smartphone demand “came a little bit sudden.” The company’s Q1 2019 expectations mark a sharp 14% decline in revenue — its lowest since 2009.

Unlike TSMC and Apple’s CEO Tim Cook, local analysts seem to believe that slowing demand for smartphones and ongoing global trading uncertainty are the least-contributing factors for these declines, as CCN recently reported. According to them, demand for non-premium but equally powerful devices has risen sharply.

Apple to Cut Costs with ‘Hiring Reductions’

Tim Cook and Apple EmplyeesTim Cook and Apple Emplyees
Source: Twitter @tim_cook

According to a recent report by Bloomberg, after an unsuccessful attempt to reach its December quarterly revenue target, Apple has been planning to “cut back on hiring for some divisions.”

The company’s CEO Tim Cook reportedly broke the news to its employees as questions about a hiring freeze were raised during its recent meeting to discuss its revised Q1 2019 targets.

Despite that as well as Apple’s recent struggles and a declining stock price, the company has been adopting aggressive measures to reinforce its presence in the medical sector.

Series 4 Apple Watch with Medicare Plans?

According to a recent report, Apple has been in talks with no less than three private Medicare plan providers in hopes to subsidize its Series 4 for adults above the age of 65. So far, no deals have been reported.

This move shouldn’t come as a surprise, especially after the recent addition of fall detection and an electrocardiogram to its watch. These features have the potential to save insurers hefty-priced hospital visits, save the lives of the elderly as well as bring revenue to Apple.

Could 5G Smartphones Save The Market?

Some analysts believe that people’s expectations for innovation are very high, and the past few years there has been very little of that, especially when it comes to Apple.

iPhone image from Shutterstock.

“There are few bright spots this year, and 5G smartphones will only become more common next year. High-performance computing will not be able to offset the smartphone slowdown,” according to Mark Li, an analyst at Sanford C. Bernstein.

How the market develops over the upcoming years will depend on the outcome of the ongoing US-China trade war as well as various other global economic struggles.