Chipmaker TSMC’s profit bigger than expected

  • Technology
  • Friday, 17 Jan 2020

TAIPEI: Taiwan Semiconductor Manufacturing Co (TSMC) projected quarterly revenue well above analysts’ estimates, underscoring hopes that the rollout of fifth-generation enabled smartphones in 2020 will galvanise growth for Apple Inc’s main chipmaker.

TSMC forecast revenue of US$10.2bil to US$10.3bil in the March quarter, surpassing estimates for US$9.6bil.

Taiwan’s largest company also posted a fourth-quarter profit that beat the highest analyst’s estimate after customers from Apple to Huawei Technologies Co adopted more advanced semiconductors in smartphones.

The robust results demonstrate how the world’s largest contract chipmaker is investing in technology to safeguard its market lead over Samsung Electronics Co and Intel Corp. TSMC spent almost US$15bil on technology and capacity in 2019 and is prepared to shell out as much as US$16bil this year, anticipating the advent of fifth-generation smartphones.

The company, a barometer for the tech industry thanks to its heft and place in the supply chain, has said the advent of 5G would result in more chips in devices than before.

TSMC’s shares are up 1% this year but have declined over the past two sessions, depressed by uncertainty over US-Chinese tensions despite the signing of a trade deal.

Analysts warn about the potential damage to TSMC and the global supply chain if Washington were to tighten existing restrictions on exports to Huawei – the world’s No. 2 maker of smartphones.

TSMC, which previously reported record fourth-quarter revenue of NT$317.2bil, counts Apple and Huawei among its top customers. Chief executive officer C.C. Wei has expressed hopes that the emergence of 5G, the foundation of future technologies from automated factories and smart homes to faster consumer electronics, will underpin its business in coming years.

In addition to 5G, TSMC’s counting on growing demand for high-performance computing. Positive comments from Micron Technologies Inc and Samsung suggest the global semiconductor market is poised for a gradual recovery on the back of demand related to 5G, artificial intelligence and automotive applications.

Yesterday, TSMC reported better-than-expected net income of NT$116bil (US$3.9bil) in the December quarter. Gross margins came in at 50.2%, also exceeding estimates.

“5G will ramp sooner or later, and there is no sign that Intel will regain the technology leadership or even narrow the gap soon,” Mark Li, semiconductor analyst at Bernstein, wrote in a report before the results release. — Bloomberg

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