Taiwan’s TSMC forecasts higher Q3 sales vs. Q2 on 5G demand

20, Jul. 2019

TSMC chief executive and vice chairman C. C. Wei briefs reporters on second quarter earnings in Taipei on Thursday.
TSMC chief executive and vice chairman C. C. Wei briefs reporters on second quarter earnings in Taipei on Thursday.

TAIPEI, NNA – Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, on Thursday projected sales in July-September would rise nearly 20 percent from the previous quarter, thanks to growing demand for chips used in fifth-generation (5G) communications networks.

Key points:

―― TSMC, whose major clients include Apple Inc., projected a group revenue in a range of $9.1 billion to $9.2 billion for the July-September quarter. The company provided Q3 forecasts in U.S. dollar terms only, assuming an exchange rate of NT$31.0 to the greenback.

―― The chipmaker reported consolidated revenue of NT$241 billion ($7.8 billon) in the April-June quarter, up 3.3 percent on year, and a net profit of NT$66.8 billion, down 7.6 percent.

―― TSMC projected the gross profit margin in the current quarter would be between 46 percent and 48 percent, up from 43 percent a year earlier, while the operating margin is seen in a range of 35 percent to 37 percent, up from 31.7 percent seen a year ago.

―― The gross margin for the second quarter was 43.0 percent, up 1.7 percentage points from the first three months, thanks to a slightly more favorable foreign exchange rate, TSMC Chief Financial Officer Lora Ho told reporters on Thursday, adding that the company had recovered from the fallout from an industrial incident. TSMC discovered that a batch of photoresist polymer from a chemical supplier contained a specific component which was abnormally treated, forcing it to scrap a batch of wafers, the company said in February.

―― In Q2, the operating margin stood at 31.7 percent and the net profit margin 27.7 percent.

―― Broken down by product category, 16-nanometer wafers accounted for 23 percent of overall wafer sales, while those of 7-nanometer wafers came to 21 percent. On a platform basis, smartphones comprised 45 percent of sales, high-performance computers made up 32 percent and the Internet of Things 8 percent.

―― The company spent $3.75 billion on capital investment in the second quarter, up from $2.46 billion in Q1, Ho said.

Takeaway:

―― The company forecast that all platforms, in particular smartphones and high-performance computers, will benefit from 5G development in Q3.

―― On the downside, TSMC Chairman Mark Liu said South Korea’s dispute with Japan could disrupt supply chain networks for semiconductors. Tokyo has tightened guidelines on exports to South Korea of three materials crucial to making chips for smartphones and screens.