Taiwan chip giant TSMC cuts global smartphone outlook, sees weaker high-end demand

  • TECH
  • Thursday, 14 Jul 2016

Good forecast: Taiwan Semiconductor Manufacturing Co expects a third-quarter pick-up as customers stock up on chips for new launches in time for the year-end holiday season. — Reuters

TAIPEI: Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chipmaker and an Apple Inc supplier, cut its estimate for 2016 global smartphone shipments for the second time this year as slowing demand for high-end handsets gnaws away at a major driver of tech sector growth.

The lowered smartphone growth forecast came as TSMC, an industry bellwether, said it would raise capital spending this year in a bet on next-generation chips, comforted by hopes for a traditional third-quarter pickup as customers stock up on chips for new launches in time for the year-end holiday season.

"We estimate smartphone unit growth rate will be about 6%" this year, said TSMC's co-Chief Executive Officer Mark Liu, speaking at a briefing as it issued its third-quarter outlook. In April, TSMC had already cut its growth estimate to 7% from an original 8% forecast issued at the start of the year.

Liu maintained his view that low- and mid-range smartphones will continue to drive growth, while high-end smartphone demand will not grow as strongly as in the past.

The outlook for the smartphone industry is key for TSMC – supplying chips for use in smartphones drives just over half its revenue.

Revenue for July-September is expected to reach between T$254bil (RM31.26bil) and T$257bil (RM31.63bil), up from the second quarter's T$221.81bil (RM27.3bil), TSMC said.

Executives said they were seeing demand from China, due to government subsidies there to stimulate consumption, and from the low- to mid-end smartphone market, as well as demand from Android-based users, the rival to Apple's iPhone ecosystem.

Still, TSMC stuck to its forecast for revenue and operating profit to grow between 5% and 10% in 2016.

TSMC also revised its capital expenditure for the year upwards by US$500mil (RM1.97bil) to a range between US$9.5bil (RM37.42bil) and US$10.5bil (RM41.35bil), which TSMC Chief Financial Officer Lora Ho said had to do with capacity for next year needed for its advanced technology wafer-making.

The company earlier said net income in the April-June period totalled T$72.51bil (RM8.93bil), down 8.7% from the same quarter a year earlier, but up nearly 12% from the first quarter.

That beat analysts' average estimate of T$67.98bil (RM8.37bil), according to Thomson Reuters Eikon. — Reuters

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