Morgan Stanley has downgraded its stock rating on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, after the US brokerage cut its forecast for Samsung Electronics Co’s flagship smartphone.
In a recent report, Morgan Stanley reduced its estimates for shipments of the Samsung Galaxy S4 from 24 million units to 21 million in the second quarter and from 27 million units to 22 million in the third quarter, citing a decline in component orders.
While the Galaxy S4 smartphone uses a chipset from Qualcomm Inc, which is one of TSMC’s clients, the brokerage firm forecast that every 5 million cut to the Galaxy S4 shipment estimates will translate to about a 1 percent revenue shortfall for TSMC.
“We downgraded TSMC [from overweight] to equal weight, but currently still expect to see solid third-quarter growth,” Hong Kong-based Morgan Stanley analyst Bill Lu (呂家璈) said in the report.
He said that the forecast revision of Galaxy S4 shipments is “a slight negative” to the market sentiment, but not enough to impact TSMC’s fundamentals.
Further, Samsung is expected to partially offset the weaker-than-expected Galaxy S4 sales by launching more high-end Galaxy models, which are likely to use more of Qualcomm’s chips and benefit TSMC, Lu said.
TSMC shares closed up 1.44 percent at NT$106 on Friday.
TSMC chairman Morris Chang (張忠謀) said on Tuesday that TSMC has gained an edge over global competition and added that he is upbeat about the company’s earnings outlook.
TSMC is leading in advanced production process development, including the development of 20-nanometer and 16-nanometer technologies, Chang said during an annual general meeting. Chang said he is optimistic that the foundry operator will report record high sales and net profits this year.
Last year, TSMC posted NT$506.25 billion (US$16.98 billion) in consolidated sales, up 18.5 percent from a year earlier.