TSMC Revenue Forecast Beats Analyst Expectations on Strong iPhone Demand

Oct 17, 2019
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TSMC (TPE:2330), the world's largest contract semiconductor manufacturer, is projecting revenue ahead of analysts' expectations on the back of strong demand for the new iPhone and a move away from the China supply chain.

The company reported Thursday that third-quarter revenue increased 10.7% year-over-year, and 21.3% from the previous quarter, coming in at $9.40 billion, while the firm posted a net income of $3.3 billion, a rise of 13.5%.

TSMC Optimistic About 5G Demand; Sets 2020 Capital Expenditure Between $14 Billion – $15 Billion

Looking ahead, TSMC expects revenue of between $10.2 to $10.3 billion surpassing analysts' forecasts of $9.9 billion. Gross profit margin is expected to be between 48% and 50% while the Operating profit margin is expected to be between 37% and 39%.

In this most recent quarter, shipments of 7-nanometer silicon accounted for 27% of total wafer revenue and shipments of silicon-based on the 10-nanometer process technology contributed 2%, while 16-nanometer accounted for 22%, according to the company. Advanced technologies, defined as anything below 16-nanometer, accounted for 51% of total wafer revenue.

TSMC shares have risen 28% so far this year. TSMC closed down 1% on Thursday in Taipei prior to the earnings announcement. All in all, the company now has a market value of $251.3 billion, which makes it bigger than Intel (NASDAQ:INTC) which comes in at $232 billion.

As more technology manufacturing moves towards the Taiwan supply chain, and telecoms around the world roll out 5G networks (IDC expects 5G shipments to reach 8.9% of smartphones shipped in 2020), TSMC is anticipating a big surge in demand. The company announced it is accelerating its spending accordingly, hiked its estimate for 2019 capital expenditure to $14 billion to $15 billion from $11 billion previously.

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Reportedly, Apple (NASDAQ:APPL) is said to be pushing its supply chain to be prepared with supply to hit the high end of an original forecast for 70 million to 75 million unit shipments in 2019.

TSMC Proves Taiwan is a Trade War Winner

While TSMC beat analysts' expectations on revenue given the iPhone 11's better-than-expected sales, the big boost in Capex spending the company has booked is about more than just an uptick in smartphone sales.

Even before the US-China trade war, firms were trying to reduce their supply chain exposure to China. The trade war has only acted as an accelerant (though there are differing opinions) to what was already taking place. Taiwan has an advantage in semiconductor manufacturing over China for some time, although that gap has been recently narrowing, but the trade war has put this advantage squarely back in Taiwan's court. Demand is anticipated to rise, and TSMC's big boost in spending reflects this.

 

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