(Bloomberg) — Taiwan Semiconductor Manufacturing Co. forecast quarterly revenue sharply below projections, as the sole supplier of the iPhone’s main processor grapples with plateauing demand for Apple Inc.’s flagship gadget.
The world’s largest contract chipmaker forecast revenue of $7.3 billion to $7.4 billion this quarter, compared with the $8.1 billion average of analysts’ estimates. It also predicted an gross margin of 43 to 45 percent, also below projections. TSMC earlier reported net income just marginally higher than a year earlier.
Apple kicked off the year with a cut to its revenue outlook, its first in almost two decades, as a slowing Chinese economy and intense competition hammered iPhone sales. That shock downgrade by TSMC’s biggest customer exacerbated concerns about whether the U.S. company and its suppliers can weather an increasingly saturated global smartphone market. In TSMC’s case, demand for crypto-mining chips has also dissipated, hitting one of its fastest-growing businesses.
“TSMC is another victim of weak iPhone demand & crypto bubble, and the gains through other customers just barely offset that,” Sanford C. Bernstein analysts led by Mark Li wrote in a note on Monday. They cut the Taiwanese chip maker’s outlook for 2019, estimating revenue will come in flattish and earnings-per-share fall 3 percent.
TSMC will now struggle to plug the hole left by Apple’s declining smartphone orders in 2019, Li said. That suggests the Taiwanese company, whose shares just went through their worst quarter in a decade, may struggle to recoup those losses. The company relies on Apple for about a quarter of its revenue, the analyst estimated.
On Thursday, the company reported net income of NT$99.98 billion ($3.2 billion) in the three months ended December. That compares with the NT$99.06 billion average of estimates compiled by Bloomberg. But gross margin of 47.7 percent trailed projections for 48.2 percent. It previously reported a 4.4 percent rise in fourth-quarter revenue to NT$289.8 billion. TSMC is earmarking capital spending of $10 billion to $11 billion.
Huawei Technologies Co., the Chinese smartphone and network gear maker, is TSMC’s second largest customer, according to data compiled by Bloomberg. The Shenzhen-based company is facing increased global scrutiny.
TSMC’s fortunes matter to global investors: it features on about 13 percent of the world’s active equity portfolios, according to the latest eVestment data. That makes it the most widely held stock in Asia and behind only Alibaba Group Holding Ltd. as the second most-owned emerging market company, the data show. Shares in the Taiwanese company closed at NT$220.50 on Thursday, down 2.2 percent since the beginning of the year.
To contact the reporter on this story: Debby Wu in Taipei at [email protected]
To contact the editors responsible for this story: Robert Fenner at [email protected], Edwin Chan
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