TSMC upbeat on chip outlook after Apple-Qualcomm settlement; Q1 disappoints
* Q2 revenue forecast range $7.55 bln to $7.65 bln
* Sees Q2 operating margin at 31-33 pct vs 36.2 pct yr prior
* Q1 profit T$61.4 bln vs T$64.3 bln analyst view
* Q1 revenue down 16 pct on year in U.S. dollar terms
(Recasts, adds other company comment)
By Yimou Lee and Roger Tung
TAIPEI, April 18 (Reuters) - Taiwan's TSMC struck
an upbeat note about the outlook for the depressed global chip
market, betting that a rollout of faster 5G mobile network would
buoy demand, even as it posted its steepest quarterly profit
drop in more than seven years.
TSMC, the world's biggest contract chipmaker, said a recent
settlement between its top clients Apple and Qualcomm
to end their two-year legal dispute over smartphone
chips will help the Taiwanese firm.
"The settlement will bring forward 5G adoption; this will
definitely benefit TSMC," Elizabeth Sun, a senior director at
TSMC told reporters on Thursday.
The upbeat forecast echoes that from its supplier ASML
, which reported a better-than-expected quarterly
profit on Wednesday and said it expects growth to accelerate
thanks to demand from Chinese chipmakers.
"While the economic factor and mobile product seasonality
are still lingering as we move into second quarter, we believe
we may have passed the bottom of the cycle of our business as we
are seeing demand stabilizing," TSMC CFO Lora Ho said.
TSMC, a proxy for technology demand as its clients
include iPhone maker Apple, Qualcomm and Huawei Technologies
, posted a 32 percent drop in its net profit to T$61.4
billion ($2 billion) for January-March.
That marked the steepest fall since the third quarter of
2011 and also lagged the T$64.3 billion average of 21 analyst
estimates compiled by Refinitiv.
Slowing global demand for smartphones, as well as concerns
over the prolonged U.S.-China trade war, has taken a toll on
Taiwan's supply chain manufacturers.
TSMC, formally Taiwan Semiconductor Manufacturing Co Ltd,
forecast second-quarter revenue of $7.55 billion to $7.65
billion. That would be 2.5-3.8 percent lower than the year ago,
but better than a steep 16 percent drop in the first quarter.
A defective chemical that disrupted part of its production
in February weighed on its first-quarter revenue, TSMC added.
The company also forecast gross margin of 43 percent to 45
percent in the second quarter, and operating margin of 31-33
percent, compared with 47.8 percent and 36.2 percent a year
The forecast comes as investors fret about a global tech
slowdown after rivals including Samsung Electronics Co Ltd
recently flagged weak demand.
Analysts said TSMC would gradually recover from sluggish
smartphone sales in coming months and new demand including for
devices equipped with 5G communications technology could help
keep full-year revenue at least broadly flat.
"Fortunately 5G should put TSMC back to growth and help it
deliver double-digit earnings per share expansion in 2020 and
2021," Mark Li, an analyst at Sanford C. Bernstein, wrote in a
research note prior to the earnings announcement.
Analysts also said TSMC could benefit from Chinese clients
stocking up on semiconductor products in case of any adverse
outcome from the U.S.-China trade negotiations.
Prior to the earnings announcement, shares in TSMC closed up
1.15 percent versus a 0.6 percent fall in the wider market
. The stock has risen around 18 percent so far this year.
($1 = 30.8580 Taiwan dollars)
(Reporting by Yimou Lee and Roger Tung; Writing by Clare Jim;
Editing by Christopher Cushing, Miyoung Kim and Himani Sarkar)
First Published: 2019-04-18 07:39:44
Updated 2019-04-18 12:00:10
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