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MarketScreener Homepage  >  Equities  >  Taiwan Stock Exchange  >  Taiwan Semiconductor Manufacturing Company Limited    2330   TW0002330008

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED

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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.
5G NETWORKS LIMITED 3.50% 1.625 End-of-day quote.116.67%
APPLE INC. -0.76% 114.09 Delayed Quote.56.59%
ASML HOLDING N.V. 1.10% 318.25 Delayed Quote.19.38%
BASE CO., LTD. 5.44% 6980 End-of-day quote.158.20%
BASE,INC. 5.48% 11550 End-of-day quote.558.12%
EURO / US DOLLAR (EUR/USD) 0.58% 1.1742 Delayed Quote.3.77%
QUALCOMM, INC. -0.92% 117.38 Delayed Quote.29.77%
SAMSUNG ELECTRONICS CO., LTD. 0.00% 58200 End-of-day quote.4.30%
SK HYNIX, INC. 1.82% 84000 End-of-day quote.-10.73%
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED -0.12% 431 End-of-day quote.30.21%
THE GLOBAL LTD. -7.21% 206 End-of-day quote.-56.26%
WORLD CO., LTD. 0.48% 1475 End-of-day quote.-45.19%
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Financials
Sales 2020 1 299 B 44 770 M 44 770 M
Net income 2020 479 B 16 517 M 16 517 M
Net cash 2020 364 B 12 562 M 12 562 M
P/E ratio 2020 23,3x
Yield 2020 2,49%
Capitalization 11 176 B 385 B 385 B
EV / Sales 2020 8,33x
EV / Sales 2021 7,59x
Nbr of Employees 48 752
Free-Float 93,6%
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Technical analysis trends TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
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TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 471,10 TWD
Last Close Price 431,00 TWD
Spread / Highest target 48,5%
Spread / Average Target 9,30%
Spread / Lowest Target -29,0%
EPS Revisions
Managers
NameTitle
Che Chia Wei Vice Chairman & Chief Executive Officer
Te Yin Liu Chairman
J. K. Wang Senior Vice President-Operations
Jen Chao Huang Chief Financial Officer
Renzhao Huang Chief Financial Officer
Sector and Competitors
1st jan.Capitalization (M$)
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED30.21%384 302
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BROADCOM INC.16.23%148 573
QUALCOMM, INC.29.77%133 666
TEXAS INSTRUMENTS7.82%130 009