Semiconductor giant TSMC expects flat Q2 on weak demand in COVID-19 fallout

16, Apr. 2020

Photo by Ian Battaglia on Unsplash
Photo by Ian Battaglia on Unsplash

TAIPEI, NNA - Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, said it foresees flat earnings in the April-June quarter amid the economic fallout from the global coronavirus pandemic.

Better known as TSMC, the semiconductor giant expects Q2 revenue to be between $10.1 billion and $10.4 billion, supported by a ramp up in output of 5G smartphones and demand for high-performance computing-related products.

The estimates would be roughly on par with the $10.31 billion achieved in the first three months of 2020, the company said on Thursday.

“We expect our second quarter revenue to be flattish as weaker mobile demand is expected, and (is) to be balanced by continuous 5G deployment and higher-performance computer-related product launches,” CEO C.C. Wei told an online investor conference.

TSMC's January-March revenue jumped an impressive 45.2 percent year on year but dipped 0.8 percent on quarter. Net profit margin was 37.7 percent, up 1.1 percentage point from the previous quarter, in line with the company's forecast.

A gross profit margin in the quarter, which starts this month, is likely to hit 50 to 52 percent or at the same level as first quarter's 51.8 percent. The company expects an operating profit margin of 39 to 41 percent, just a bit lower than 41.4 percent of the previous quarter.

TSMC is seeing a much weaker performance by consumer electronics and automotive applications in the near term, in contrast with an increasing demand for high-performance computing driven by demand for teleworking.

Taking a cautious view of grim situations ahead, Wei warned of poor demand as a result of the coronavirus epidemic worldwide and supply chain disruptions in the first half of this year, although the company has not yet suffered any significant drop in customer orders.

But he stressed that the pandemic will not change TSMC’s mid-to-long term capital expenditure. For 2020, it has set aside $15 billion to $16 billion, 80 percent of which will be allocated for advanced process technologies.

Smartphone chips contributed 49 percent, the lion's share of first quarter revenue though it was down 9 percentage points from the previous quarter. Orders for high-performance computer chips went up by 3 percentage points and accounted for 30 percent of the earnings. Processors for internet of things grew 8 percentage point, contributing 9 percent to total revenue.

Wei said TSMC expects the overall semiconductor market, excluding memory chips, in 2020 to be flat after an adjustment with a slight dip from the 8 percent given in the earlier forecast.