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MarketScreener Homepage  >  Equities  >  TAIWAN STOCK EXCHANGE  >  Taiwan Semiconductor Mfg. Co. Ltd.    2330   TW0002330008

TAIWAN SEMICONDUCTOR MFG. CO. LTD.

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TSMC expects 5G earnings boost, flags S.Korea-Japan spat as risk

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07/18/2019 | 05:44am EDT
FILE PHOTO: A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu

TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (TSMC) on Thursday said it expects a stronger half-year on 5G telecoms demand, and that a dispute over chip-making materials between Japan and South Korea is its most uncertain factor.

The world's largest contract chipmaker reported a decline in second-quarter profit, but said demand is likely to recover during the rest of 2019 particularly from smartphone makers, hampered at present by the impact of a Sino-U.S. trade war.

"Although our business continues to be impacted by a global slowing economy ... we have also passed the bottom of the cycle of our business and again began to see demand increasing," Chief Executive Officer and Vice Chairman C.C. Wei told analysts during an earnings briefing.

Taiwan's supply chain manufacturers have been navigating slowing global demand for smartphones - a primary source of revenue - as well as market disruption stemming from tit-for-tat import tariffs between China and the United States, plus the latter's ban on U.S. companies doing business with Chinese telecoms equipment maker Huawei Technologies Co Ltd.

Adding to risk factors, Japan last week tightened curbs on exports of high-tech materials used in smartphone displays and chips to South Korea, home to the world's biggest memory chip makers, Samsung Electronics Co Ltd and SK Hynix Inc.

TSMC Chairman Mark Liu said the dispute is a major uncertainty for the coming months as it is likely to impact technology supply chains, as Japan dominates the market for the materials in question.

Earlier, TSMC, a proxy for technology demand as its clients include iPhone maker Apple and chip leader Qualcomm Inc, reported a 7.6% decline in April-June net profit at T$66.77 billion (£1.73 billion), meeting analyst estimates.

Revenue rose 3.3% to T$241 billion, but fell 1.4% to $7.75 billion in U.S. dollar terms - still topping both the firm's forecast and the average of 23 analyst estimates compiled by Refinitiv.

Business in the third quarter will be driven by increased demand for fifth-generation telecommunications (5G) equipment as well as for smartphones spurred by new product launches, and the fourth quarter will be even stronger, Wei said.

TSMC forecast a gross profit margin of 46% to 48% for the third quarter, and an operating margin of 35% to 37%, compared with 47.4% and 36.6%, respectively, a year earlier.

The chipmaker also said it expected annual capital expenditure for the year to exceed the high end of its earlier forecast of $10 billion to $11 billion due to strong 5G demand.

Even so, analysts were cautious on TSMC's growth outlook for the coming months, citing a slower-than-expected introduction of 5G technology and still-tepid demand for smartphones, which they said accounted for nearly half of its first-quarter sales.

"With a still-slow demand recovery and excessive inventory, we think wafer orders from fabless companies might remain weak," Fubon Securities analyst Sherman Shang wrote in a research note prior to TSMC's earnings announcement.

TSMC's short-term downside, however, could be supported by "major customers' recovery in 2020 from a very low base in 2019, such as Apple," Shang wrote.

Indicating evolving market conditions, the spread of accelerating spread of 5G networks helped Dutch semiconductor equipment maker ASML Holding, a supplier to TSMC, beat analysts' second-quarter earnings estimates on Wednesday.

Prior to TSMC's announcement, shares in the chipmaker closed up 0.8% versus a 0.25% fall in the wider market <.TWII>. The stock has risen around 13% so far this year.

(This story corrects year-earlier margin numbers in first bullet and paragraph 10)

(Reporting by Yimou Lee; Editing by Christopher Cushing)

By Yimou Lee

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 0.48% 236.41 Delayed Quote.49.16%
ASML HOLDING N.V. -0.44% 228 Delayed Quote.66.23%
QUALCOMM -1.63% 77.68 Delayed Quote.36.50%
SAMSUNG ELECTRONICS CO LTD End-of-day quote.
SK HYNIX INC End-of-day quote.
TAIWAN SEMICONDUCTOR MFG. CO. LTD. End-of-day quote.
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Financials (TWD)
Sales 2019 1 069 B
EBIT 2019 370 B
Net income 2019 342 B
Finance 2019 422 B
Yield 2019 3,40%
P/E ratio 2019 22,2x
P/E ratio 2020 18,2x
EV / Sales2019 6,71x
EV / Sales2020 5,83x
Capitalization 7 598 B
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 325,17  TWD
Last Close Price 293,00  TWD
Spread / Highest target 28,0%
Spread / Average Target 11,0%
Spread / Lowest Target -27,6%
EPS Revisions
Managers
NameTitle
Che Chia Wei Vice Chairman & Chief Executive Officer
Te Yin Liu Chairman
J. K. Wang Senior Vice President-Operations
Renzhao Huang Chief Financial Officer
J. K. Lin SVP-Information Technology & Materials Management
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NVIDIA CORPORATION42.69%116 008
BROADCOM INC.12.76%113 737
QUALCOMM36.50%94 432