Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies chips for Apple Inc’s iPhones, yesterday cut its revenue growth forecast for this year again, to less than 10 percent, as volatile bitcoin prices dampened demand for the chips used in cryptocurrency mining machines.
The latest downward adjustment came after TSMC reported a 19.5 percent contraction in net profit to NT$72.29 billion (US$2.36 billion) for the April-to-June quarter, compared with NT$89.79 billion in the first quarter. Net profit expanded 9.1 percent year-on-year from NT$66.27 billion.
At the beginning of this year, the Hsinchu-based chipmaker was aiming for a revenue growth rate of between 10 and 15 percent for this year.
However, a decrease in smartphone demand last quarter and the recent decline in cryptocurrency mining activity has prompted clients to cut orders, TSMC said.
“TSMC’s 2018 revenue in US dollar terms will grow at a high single-digit percent rather than the previously stated 10 percent, due to a weakness in cryptocurrency mining demand,” TSMC chief executive officer C.C. Wei (魏哲家) told investors.
However, Wei said that increasing demand for smartphones and graphics processing units for artificial intelligence (AI) and gaming devices would continue to fuel TSMC’s growth in the second half of the year.
Looking ahead, TSMC said its “financial objectives remain unchanged” for the five-year period from last year to 2021.
The company is still looking to increase its revenue and profits at a compound annual growth rate of between 5 and 10 percent during the five-year period, chief financial officer Lora Ho (何麗梅) said, adding that it is targeting a gross margin of 50 percent and a 20 percent return on equities.
Wei said AI and 5G technology would drive the growth of its four major growth platforms — smartphones, high-performance computing (HPC), and the Internet of Things (IoT) and automotive sectors.
The HPC segment, which includes servers and cryptocurrency chips, would see the fastest annual growth of 40 percent this year, while the IoT and automotive sectors would increase by about 20 percent, TSMC said.
The chipmaker yesterday lowered its capital expenditure to between US$10 billion and US$10.5 billion, from its previous estimate of between US$11.5 billion and US$12 billion, mostly because of equipment relocation.
For this quarter, “our business is to benefit from new product launches using TSMC’s leading 7-nanometer [nm] technology,” Wei said.
Revenue would regain growth of about 8.2 percent to between US$8.45 billion and US$8.55 billion this quarter, compared with US$7.85 billion last quarter, TSMC said.
Gross margin is to rise to between 48 and 50 percent, from 47.8 percent last quarter, due to higher factory utilization and favorable foreign-exchange rates, it said.
The 7nm chips would account for a bigger revenue share of 10 percent this quarter and rise to 20 percent next quarter, from less than 1 percent last quarter, when the technology first entered volume production, Wei said.
Next year, 7nm chips would contribute more than 20 percent to TSMC’s overall revenue, he said.
In addition, TSMC’s advanced version of its 7nm technology, or 7nm-plus technology, would enter volume production in the second quarter of next year, making the firm the first to use extreme ultraviolet production systems, he said.
Commenting on reported escalating US-China tensions, TSMC chairman Mark Liu (劉德音) said it would have a minimal effect on business, as mobile phones, notebook computers and consumer electronics, which contain a lot of chips, are not included in Washington’s tariffs list.
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