The benefit of Apple Chipmaker TSMC is greater than expected

(Bloomberg) – Taiwan Semiconductor Manufacturing Co. projected quarterly revenue well above analyst estimates, underlining hopes that the launch of fifth-generation smartphones in 2020 will drive the growth of Apple’s leading chip maker Inc.

TSMC forecast revenues of $ 10.2 billion to $ 10.3 billion in the March quarter, exceeding estimates of $ 9.6 billion. Taiwan’s largest company also posted a gain in the fourth quarter that exceeded analyst’s highest estimate after Apple’s customers to Huawei Technologies Co. adopted more advanced semiconductors in smartphones.

The solid results demonstrate how the world’s largest contract chip maker is investing in technology to safeguard its market leadership over Samsung Electronics Co. and Intel Corp. TSMC spent almost $ 15 billion in technology and capacity in 2019 and is Prepared to pay up to $ 16 billion this year, anticipating the arrival of fifth-generation smartphones. The company, a barometer for the technology industry thanks to its weight and position in the supply chain, has said that the arrival of 5G will result in more chips on devices than before.

What Bloomberg’s intelligence says

Strong sales can extend to 1H periods outside peak hours, as many of TSMC’s clients such as Huawei, Qualcomm and Mediatek are accelerating their pace of adoption of cutting-edge processes to prepare for the launch of 5G mobile devices.

– Charles Shum, analyst

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TSMC shares have risen 1% this year, but have declined in the last two sessions, depressed by uncertainty over tensions between the United States and China despite the signing of a trade agreement. Analysts warn of the potential damage to TSMC and the global supply chain if Washington tightened existing restrictions on exports to Huawei, the world’s second largest smartphone maker.

TSMC, which previously reported record revenues in the fourth quarter of NT $ 317.2 billion, has Apple and Huawei among its main customers. Executive Director C. C. Wei has expressed the hope that the emergence of 5G, the basis of future technologies from automated factories and smart homes to faster consumer electronics, will support his business in the coming years.

In addition to 5G, TSMC has the growing demand for high performance computing. Positive comments from Micron Technologies Inc. and Samsung suggest that the global semiconductor market is prepared for a gradual recovery due to demand related to 5G, artificial intelligence and automotive applications.

On Thursday, TSMC reported a better than expected net income of NT $ 116 billion ($ 3.9 billion) in the December quarter. Gross margins reached 50.2%, also exceeding estimates.

“The 5G will increase sooner or later, and there are no signs that Intel will regain technological leadership or even narrow the gap soon,” wrote Mark Li, a semiconductor analyst at Bernstein, in a report before the results were published.

(Updates with estimates of capital expenditures in the third paragraph)

To contact journalists in this story: Debby Wu in Taipei at [email protected]; Gao Yuan in Beijing at [email protected]

To contact the editors responsible for this story: Peter Elstrom at [email protected], Edwin Chan, Colum Murphy

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