TSMC forecasts plunge in Q1 2019 revenue amid slowing iPhone sales

18, Jan. 2019

TAIPEI, NNA - Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, said it expects first-quarter revenue to plunge about 22 percent, blaming sluggish iPhone sales.

The company revealed its earnings outlook Thursday, projecting a quarter-on-quarter decline in consolidated revenue for the January-March period to $7.3 billion-$7.4 billion.

The projected revenue for the current quarter would be the least since the second quarter of 2017 when earnings were hit by tepid chip demand, Lora Ho, senior vice president and chief financial officer, said at the company’s earnings conference for the last three months of 2018.

“Due to the recent changes in high-end smartphone business conditions, our 7-nanometer capacity will see a substantial cutback on the utilization rate in the first and the second quarters (of 2019),” Ho said, adding it would slash the company’s gross margin by more than 4 percentage points in both quarters.

TSMC, whose major clients include Apple Inc., expects to post a gross margin between 43 percent and 45 percent in the current three-month period, down from 47.7 percent in the fourth quarter of 2018.

The operating margin will also drop from 37 percent for the fourth quarter to between 31 percent and 33 percent for the first three months of this year, it said.

"Our fourth-quarter business benefited from the strong demand for our 7-nanometer technology covering both mobile and high performance computing applications," Ho said in a statement.

"Moving into the first quarter 2019, we anticipate our business will be dampened by the overall weakening of the macroeconomic outlook, mobile product seasonality, and high levels of inventory in the semiconductor supply chain.”

TSMC reported fourth-quarter net profit of 99. 98 billion New Taiwan dollars ($32 billion), a 0.7 percent increase from a year earlier and 12.3 percent up from the previous quarter. Consolidated revenue rose 4.4 percent year-on-year to NT$289.77 billion, up 11.3 percent quarter-on-quarter, in line with the company’s projection.

CEO and Vice Chairman C. C. Wei forecast that the global semiconductor market, excluding memory chips, would grow 1 percent this year and TSMC’s revenue will rise by 1 to 3 percent. “We estimate our business will grow only slightly in 2019, given the slowing economic environment,” he said Thursday at the earnings conference.

Despite the downbeat outlook for 2019, Wei said he firmly believes that artificial intelligence and fifth-generation mobile-phone networks to drive future growth in the semiconductor industry.