TSMC, Samsung Drop In Stock Market Despite Cumulative $13 Billion Q1 Revenue Projection

This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

As the dust from 2019 Coronavirus' outbreak starts to settle, countries impose lockdown and major indexes sinking to new lows, the impact on demand for tech products can be gauged with more certainty than was previously possible. Corporations all around the world have directed non-essential workers to work from home, mirroring post-outbreak quarantine measures taken in China at the start of this year.

Western countries have announced lockdowns, and corporations have turned to liquidity as a backup to cater to fixed and other costs during a period that might very well become a recession if a drop in negative growth holds.

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Nevertheless, semiconductor fabrication plans continue to run normally as both Samsung and TSMC (NYSE:TSM) are yet to risk excess capacity. Both TSMC and Samsung are set to report record revenues for the calendar year 2019's first quarter, suggests data from market research firm TrendForce release last week.

TSMC, Samsung maintain strong levels for fabrication capacity utilization as Coronavirus (COVID-19) reported to stimulate demand for silicon products

Taiwan's lack of proximity to China seems to have shielded the territory from the Coronavirus's devastating impact on tech supply chains. Foundry reported data analyzed by TrendForce reveals that for the first quarter of 2020, all major and minor chip fabrication companies are set to increase their revenue year-over-year.

TSMC is reported to meet peak 7nm wafer-start capacity utilization through the end of this quarter, owing to existing customer contracts and untapped demand.  A slowdown in market demand believed to stem from reduced consumer spending is expected to reduce the Taiwanese fab's capacity utilization for nodes below 12nm and reaching 16nm.

Like TSMC, Koren tech giant Samsung is not facing any capacity utilization concerns for the time being, with the company currently busying itself with telecommunications productions including chips and application processors for devices connecting to and operating fifth-generation (5G) cellular networks.

In addition to 5G and other products with low power envelopes, the Seoul-based conglomerate's fabrication division is also reportedly satisfying orders for high performance compute (HPC) products, and it is keen on promoting the merits of it 8nm fabrication process. Samsung's 8nm node will reportedly power upcoming graphics processing unit cores from NVIDIA Corporation (NASDAQ:NVDA)as-per-rumors, with Advanced Micro Devices, Inc (NASDAQ:AMD)rumored prior to the Corona-disruptions to double its 7nm orders from TSMC in the second half of the calendar year 2020.

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TSMC stock recovered slightly on Friday following reports of no capacity utilization difficulties from the 2019 Coronavirus (COVID-19) outbreak. The stock is down by 2.09% in pre-market trading as potential ramifications from a demand-glut in 2020's second-quarter start to affect investor sentiment. Graph courtesy: Koyfin

Investor pessimism continues despite a reported boom in consumer electronic demand stemming from Coronavirus-fuelled lockdowns

Yet, despite some good news from the east, American markets continue to remain pessimistic, as fear pervades sentiment thoroughly. Investors have every right to be cautious given that the Standard and Poor 500 index has lost roughly 30% during the same period, and these drops are mirrored or exceeded by other indexes in the United States and abroad.

In pre-market trading, shares of Taiwan Semiconductor Manufacturing Co., are now down by 2.09%, after having dropped by 3.44% earlier in the day. Shares of Samsung Electronics Co Ltd fell by 6.39% today in South Korea, lagging the Korea Composite Stock Price Index's drop of 5.34%.

The pessimism in semiconductor stocks comes despite a general uptick in DRAM spot prices and aggressive demand in the market surging from the U.S. Department of Defense's cloud spending. As TrendForce reports, a drop in purchasing power globally due to shutdowns carries the potential to impact foundry revenue in the year's second quarter.

Despite all this, a drop in workplace-based economic activity might not completely spell gloom and doom if we consider retailer and analyst checks made by Reuters. The news agency reports that electronics outlets and manufacturers across China, Japan and Australia are reporting an uptick in consumer spending for servers, notebooks and work-from-home accessories.

For the first quarter of the calendar year 2020, TSMC is projected to command 54% market share with Samsung coming in at a distance second through a 16% share of the pie. In United States dollar terms, the two companies combined will earn roughly $13 billion in revenue.