TSMC's sales outlook falls short as smartphone demand stalls

Taipei

TAIWAN Semiconductor Manufacturing Co (TSMC) forecast revenue below analysts' estimates, as the sole supplier of Apple Inc's iPhone processors grapples with a stalling global smartphone market.

TSMC, which is also struggling with a slowdown in cryptocurrency mining demand, is expecting sales of US$9.35 billion to US$9.45 billion this quarter, lagging the US$9.55 billion average estimate.

That's during a holiday season that often marks peak sales for customers including Apple, whose latest gadgets went on sale last month. For 2019, Taiwan's largest company also foresees a bump in spending - key to retaining its technological edge - to as much as US$12 billion.

While TSMC remains the exclusive maker of iPhone processors, it's coming up against a global smartphone market that's seeing little growth as customers take longer to replace devices and brands fail to come up with innovative designs. The world's biggest contract maker of chips is also feeling the impact of volatility in digital currencies that is hurting demand for semiconductors used to mine Bitcoin and others.

"The street remains overly bullish on TSMC's outlook for the near term as the street's forecasts may have yet to capture the weakness in demand" for chips using older technologies, Stefan Chang, an analyst at Maybank Kim Eng, wrote in an Oct 8 note.

Executives at TSMC - a bellwether for the chip industry as well as an early barometer of iPhone demand - have said they expect demand for premium devices to help offset crypto-sector lethargy in the second half.

Net income fell to NT$89.1 billion (S$3.96 billion) in the three months ended September, the Hsinchu, Taiwan-based company said. That compares with the NT$88.75 billion that analysts had expected. BLOOMBERG