Taiwan Semiconductor Manufacturing Co (TSMC) cut down one full-year investment and forecasted its sharpest quarterly revenue fall in a decade, and it has gone on and joined the string of tech companies which warned a slowdown in the global smartphone demand.
The downbeat forecast by TSMC is a proxy to the global tech demand since its clients including Apple, Qualcomm, and Huawei Technologies, bodes ill for its peers and suppliers like Intel Corp, Nvidia, and ASML which are all set to report results in the upcoming weeks. The shares of the European chipmakers fell down on Thursday after TSMC’s revenue guidance was revealed, and Siltronic fell by 6 percent, and STMicroelectronics went down by 3 percent.
Investors have been fretting seeing the global tech slowdown after warnings from Samsung Electronics Co and Apple emerged, and earlier this month, it cut down its quarterly sales forecast because of the poor iPhone demand in China.
TSMC is the world’s largest contract chipmaker, which said that in what we call a sudden drop in sales of high-end smartphones has caused an inventory build-up and weak demand which will continue to weigh on it until new smartphone are launched in the second half.
Chairman Mark Liu, during a post-earnings conference, said- “The inventory in the supply chain is quite a lot which may have led to a drop in the first half of 2019 for the smartphone business.”
The forecasting the first-quarter revenue was $7.3 billion to $7.4 billion (approximately Rs. 50,000 crores). Nearly 14 percent drop would have been the steepest decline for the company since the March 2009 quarter. This was stated by report Refinitiv data when revenue tumbled 54 percent in Taiwan dollar terms.
For the entire 2019, TSMC has been expecting growth in revenue growth by more than halve to 1-3 percent from last year’s 6.5 percent. It also announced its plans of slashing the investment.
Lora Ho, the Chief Financial Officer said- “Due to the macroeconomic outlook in 2019, we have been tightening this year’s capital by spending several hundred million dollars to a level in between $10-$11 billion.”
Market research firm Canalys estimated that the smartphone shipments would fall down by 12 percent and it happened last year in China, which is considered to be the world’s biggest smartphone market, and it has expected shipments to shrink even further by 3 percent this year which will go below 400 million for the first time since 2014.
TSMC observed a meager 0.7 percent rise in the fourth-quarter net profit in comparison to TWD 99.98 billion ($3.24 billion), which is almost in line with estimates of the analysts, according to I/B/E/S estimates from Refinitiv.
Revenue rose by 2 percent to $9.40 billion in the December quarter, which was in line with the estimates of the analysts.
Shares of TSMC (which previously had a market value of about $185 billion) trailed Samsung and Intel by that measure among the chip- and chip-equipment makers, and it closed up 1.4 percent in Taipei before the earnings were announced.