TSMC forecast revenue that fell short of expectations, as waning smartphone sales in China and a strong local currency outweigh booming demand from cryptocurrency miners, according to Bloomberg.
The main chip supplier to Apple’s iPhones and iPads, foresees sales of $8.4 billion to $8.5 billion in the first quarter, missing projections for $8.61 billion. It’s predicting a gross margin of 49.5 to 51.5 percent, only flat to slightly up from the December quarter. The disappointing outlook may stoke concerns that sales of the top-end iPhone X will turn out weaker than anticipated over the holidays and early 2018.
TSMC gave out its forecasts after reporting a third consecutive quarter of declining profit. The world’s largest producer of made-to-order microchips reported a 0.9 percent dip in net income to NT$99.3 billion ($3.4 billion) in the December quarter, exceeding the NT$97.2 billion projected. Gross margins slipped to 50 percent from 52.3 percent.
Smartphone shipments slid almost 12 percent in China in 2017 as portions of the world’s largest mobile market approached saturation point, according to the China Academy of Information and Communications Technology. TSMC however may win more orders from fast-growing brands such as Huawei, which designs its own mobile processors and may turn to TSMC for mass production.
In the longer term, TSMC’s technological edge is expected to help it weather poor smartphone sales globally. Revenue from 10 nanometer chips, the most advanced in its line-up, jumped to 25 percent of overall sales, from just a 10th in the previous quarter, typically a function of the latest iPhones.
TSMC’s preparing to spend more than $20 billion on its next state-of-the-art plant as it’s built out in coming years: the price for staying ahead of Intel and Samsung in cutting-edge production. TSMC spends $10 billion annually to stay abreast of rivals, but the cost of safeguarding its perch as the predominant player in bespoke semiconductors is climbing as chipmaking gets increasingly intricate. CFO Lora Ho expects TSMC to spend $10.5 to $11 billion this year, versus $10.86 billion in 2017.
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