They blamed it on weak smartphone demand relative to their customer expecations and share loss at qcom to samsung exynos. fireworks are just beginning by q3/4 when apple, qcom, nvidia start sourcing at samsung it will be much worse.
TSMC Sees Sales 9% Below Estimates as Mobile Chip Orders Cut (1)
(Updates with comment from Co-CEO in fourth paragraph.)
By Tim Culpan
(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. forecast sales that missed analysts estimates and cut its spending amid weaker demand for smartphone chips.
Second-quarter revenue will be NT$204 billion ($6.5 billion) to NT$207 billion, as much as 9 percent below the average of estimates. Capital expenditure was slashed by $1 billion.
TSMC, which makes smartphone chips to the designs of Apple Inc., Qualcomm Inc. and MediaTek Inc., joins Intel Corp. in cutting its sales and spending expectations. A stronger U.S. currency and weakening Chinese economy have dented sales of consumer devices globally, while TSMC cut its forecast for the most-advanced production technologies it offers.
Some of our customers appeared too optimistic on their own market outlook for the second quarter, Co-Chief Executive Officer Mark Liu told investors in Taipei today. Recently, we saw several mobile customers cut back their delivery schedule because their demand didnt come to what they anticipated.
Shares of TSMC closed at NT$147 in Taipei before the forecast was released. The stock has added 4.3 percent this year, compared with a 3.8 percent gain in the Taiex index.
The chipmaker also released earnings, with first-quarter net income climbing 65 percent to NT$79 billion. Profit surpassed the NT$77.5 billion average of 25 analysts estimates compiled by Bloomberg.
Lower Spending
Strong iPhone 6 sales are being offset by weaker demand for third-generation Chinese smartphones and tablet computers, Randy Abrams and Nickie Yue, analysts at Credit Suisse Group AG, wrote in an April 15 report. Growth is slowing in near-term orders.
TSMC also suffered when a major client lost smartphone chip orders to a rival that designs and makes its own processors, Chief Financial Officer Lora Ho said today, without naming the customer or the competitor.
Analysts have cut their second-quarter sales and operating profit estimates in the past four weeks, according to data compiled by Bloomberg. The company last month said it may have to revise its January forecast for 12 percent revenue growth in the custom-chip manufacturing sector because of the stronger U.S. dollar, which has weakened purchasing power.
While sales will improve in the second-half, TSMC reduced its spending forecast to $10.5 billion to $11 billion. Revenue from 20-nanometer technology, its most-advanced, will account for only a mid-teen percentage of sales, from an earlier 20 percent forecast, the company said today.
TSMCs reduction of its spending projection is because the company has become more efficient in using existing equipment, Ho said.
Revenue and profit growth over the next five years will average around 10 percent, Liu said today.
TSMC also cut its wider industry forecasts for the year and said it will outpace foundry peers. Global chip sales will climb 4 percent, slower than 5 percent previously estimated, while the foundry sector is forecast to expand by 10 percent, from an earlier projection for 12 percent, Liu said.
1Q 2Q
Company Company Analyst Company Analyst
Actual Forecast Estimate Forecast Estimate
Sales NT$bln 222 221-224 219.4 204-207 223.9
Gross Margin% 49.3 48.5-50.5 49.7 47.5-49.5 49.5
Op Margin% 39.0 38.5-40.5 -- 36.5-38.5 --
Sources: TSMC, Bloomberg
Liu Te-Yin (Taiwan Semiconductor Manufacturing Co Ltd)
Hmm - would this be partly because some Apple orders are now falling to samsung?
More likely because a lot of customers stay at 28nm.
65.0% increase in profits this quarter and Q2, their worst quarter, has 13% increase YoY in profits. How is that weak? A lot of companies would dream to have that type of weakness.
Depends on which rumours you decide to believe.weak relative to the statements they made in January about the outlook for the business. Smartphone sales are weaker than their customers expected. QCOM has lost share to Samsung exynos and samsung baseband.
Business has been doing well but that is just lapping apple share gains which go away 2h.
Depends on which rumours you decide to believe.
TSMC say they will regain the foundry market leadership in FinFET in 2016.