Apple supplier TSMC beats as demand rises for chips

Bloomberg

Taiwan Semiconductor Manufacturing Co (TSMC) projected current-quarter revenue ahead of estimates, as the Apple supplier shrugs off a smartphone slump and US sanctions on Huawei Technologies Co to ride demand for cutting-edge chips.
The world’s largest contract chipmaker expects sales of $9.1 billion to $9.2 billion in the September quarter, ahead of average projections for about $8.9 billion. The Taiwanese company earlier reported a fall in June-quarter net income to $2.1 billion, surpassing the NT$65.7 billion estimated.
TSMC’s solid outlook may allay fears of a persistent global chip downturn as Washington and Beijing clash. Its technological edge in chipmaking may help it grab an outsized portion of demand for advanced high-performance semiconductors, particularly as countries roll out ultra-fast fifth generation wireless networks. TSMC’s business has bottomed and should begin to rebound, Chief Executive Officer C Wei said.
“We have passed the bottom of the cycle of our business, and should see our demand increase,” he told reporters in Taipei. “We see very, very strong demand” in the second half of 2019.
Orders for crypto-mining gear are expected to help TSMC’s third-quarter sales, according to Morgan Stanley, which recently lifted its target price on the stock by 9 percent. The typical year-end ramp up of iPhone manufacturing and a new chip-product cycle from Advanced Micro Devices Inc could also buoy the top line.
“The guidance shows that management is confident on the recovery of demand in 2H, possibly boosted by new orders from AMD,” Bloomberg Intelligence Charles Shum said.
“And, we expect the gross margin can return to 50 percent” by the fourth quarter.
TSMC and its industry peers are grappling with a plateauing smartphone market, efforts by top customer Apple to move beyond hardware, and US tech-export curbs that have hammered No. 2 customer Huawei. It previously reported a 4.5 percent slide in first-half revenue — its worst January-to-June performance since 2011.
While top executives expressed confidence that things are turning around, they warned of uncertainty springing from global trade tensions. Japan’s curbs on the export to South Korea of certain vital chipmaking materials could hammer industry players like Samsung Electronics Co, and further depress global smartphone demand. “The recent Japan-Korea dispute is probably the most uncertain” factor for TSMC’s fourth quarter, Chairman Mark Liu said.