Taiwan’s TSMC forecasts slower Q2 sales but sees chip market has bottomed out

20, Apr. 2019

TSMC CEO and Vice Chairman C. C. Wei briefs reporters on first quarter earnings in Taipei on April 18.
TSMC CEO and Vice Chairman C. C. Wei briefs reporters on first quarter earnings in Taipei on April 18.

TAIPEI, NNA – Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, on Thursday forecast a sales slowdown would continue in the April-June quarter, but company officials said they believed the sluggish semiconductor market was bottoming out.

TSMC, whose major clients include Apple Inc., projected a group revenue in a range of $7.55 billion to $7.65 billion for the April-June quarter, down from 218.7 billion New Taiwan dollars ($7.1 billion) on continued slow demand.

The company provided Q2 forecasts in U.S. dollar terms only on the exchange rate assumption of 1 U.S. dollar to NT$30.85.

TSMC projected the gross margin in the current quarter would be between 43 percent and 45 percent, down from 47.8 percent in the same period a year earlier but up from 41.3 percent in the first three months of the year.

It expects its operating margin to be in a range of 31 percent to 33 percent, down from 36.2 percent a year earlier but up from 29.4 percent in the January-to-March period.

“In the first quarter, our business was impacted by the overall global economic condition which dampened the end market demand; customer inventory management to digest excess inventory in the semiconductor supply chain; and high-end mobile product seasonality,” TSMC Chief Financial Officer Lora Ho said in a statement.

“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,” she said.

Ho added that an instance of defective photoresist material trimmed the first quarter revenue by 3.5 percent.

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.

On Thursday, TSMC also reported it posted net profit of NT$61.39 billion ($1.97 billion) in January-March, a 32 percent decrease from a year earlier and down 39 percent from the final quarter of 2018.

In Q1, consolidated revenue dropped 12 percent year on year to NT$218.7 billion. It also fell 25 percent from the previous quarter.

In the first quarter, shipments of 7-nanometer wafers accounted for 22 percent of total wafer revenue, followed by the 28-nanometer version at 20 percent. In the platform sector, sales of chips for smartphones came to 47 percent of net revenue, followed by high-performance computing at 29 percent.

For the whole of 2019, TSMC has a budget of NT$310.95 billion to NT$342.04 billion for capital spending, 80 percent of which is allocated to advanced process technologies, including 7-nanometer wafers.

The company spent NT$75.94 billion on capital investment in Q1, down from NT$114.10 billion in Q4 2018.

Caption:

TSMC CEO and Vice Chairman C. C. Wei briefs reporters on first quarter earnings in Taipei on April 18.