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TSMC Flags Steepest Revenue Fall In A Decade On Smartphone Slowdown

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) forecast a nearly 14 percent drop in first-quarter revenue, its sharpest fall in a decade, joining a string of tech companies warning of a slowdown in global smartphone demand.

The results of TSMC, whose clients include Apple Inc, were being keenly watched after chipmakers including Samsung Electronics Co Ltd recently flagged weak demand. Apple also slashed its sales forecast due to slowing iPhone sales in China.

TSMC, which has a market value of about USD 185 Billion and trails just Samsung and Intel Corp by that measure among chip- and chip-equipment makers, posted on Thursday a 2 percent rise in fourth-quarter revenue and a meager bump in net profit that met market expectations.

For the first quarter, the company said it expects revenue of USD 7.3bil to USD 7.4bil. That would be the steepest decline since the March 2009 quarter, according to Refinitiv data, when revenue tumbled 54 percent in Taiwan dollar terms.

“The inventory in the supply chain is quite a lot”, which may lead to a drop in the first half of 2019 for the smartphone business, but new smartphone launches should drive a recovery in the second half, Liu added.

Market research firm Canalys estimates that smartphone shipments fell 12 percent in China last year and expects shipments in the world’s biggest smartphone market to shrink another 3 percent this year to below 400 million for the first time since 2014.

TSMC, also a key supplier to Qualcomm Inc and Huawei Technologies, posted a net profit of T$99.98bil (US$3.24bil) for the quarter ended December, 0.7 percent higher than a year ago. That is roughly in line with the T$98.94 billion average forecast, according to I/B/E/S estimates from Refinitiv.

Revenue rose to USD 9.4bil. That compared with the average USD 9.37 Billion market estimate.

Chief Financial Officer Lora Ho said TSMC’s business in the current quarter will be dampened by an overall weakening of the macroeconomy, a slowdown in mobile sales and the high level of inventory in the semiconductor supply chain.

“Due to the macroeconomic outlook in 2019, we are tightening this year’s capital spending by several hundred million dollars to a level of between USD 10-USD 11 Billion,” she said.―The Star

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