April 16, 2020 / 5:45 AM / 3 months ago

TSMC first-quarter profit almost doubles but trims full-year revenue estimate on pandemic

TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (TSMC) reported a near doubling in first-quarter net profit but trimmed its full-year revenue outlook as weakening demand caused by the coronavirus offsets strong sales for faster chips.

FILE PHOTO: A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu, Taiwan August 31, 2018. REUTERS/Tyrone Siu/File Photo

The world’s largest contract chipmaker, whose clients include tech companies such as iPhone maker Apple Inc, said profit in the January-to-March period was T$116.987 billion ($3.89 billion), up 90.6% from a year earlier,

It was the company’s strongest quarterly profit growth in nearly 10 years and much higher than the T$105.83 billion forecast on average by 19 analysts, Refinitiv Eikon data showed.

The impact from the coronavirus outbreak however prompted TSMC to trim its 2020 revenue growth target to a “mid- to high-teens” percentage versus a previous forecast of nearly 20%.

“Our second-half revenue is about flattish or may decline slightly,” Chief Financial Officer Wendell Huang told an earnings briefing on Thursday, citing what the company saw as a “temporary” impact on demand from the virus, which TSMC expects to be stabilised by June.

Huang said the coronavirus was expected to hit demand for electronics, including smartphones, but it would be balanced by continued fifth generation (5G) mobile communication technology deployment and strong demand for faster chips.

TSMC said consumer electronics demand was “much softer than expected” due to the virus, and that it expected global smartphone shipments - which accounted for nearly half of its revenue in the first quarter - to decline by a “high single-digit” percentage this year.

TSMC expected second-quarter revenue of $10.1-$10.4 billion, up from $7.75 billion a year ago.

Buoyed by demand for advanced chips from clients investing in 5G technology and artificial intelligence, TSMC’s revenue in the first quarter rose 45.2% to $10.31 billion, versus its forecast range of $10.2 billion to $10.3 billion.

The earnings growth may, however, only be a short reprieve as coronavirus-induced job losses and other economic pain hurt global demand for consumer electronics and major clients grapple with supply chain disruptions and factory shutdowns.

Gartner last week slashed its forecast for global semiconductor revenue in 2020 to a decline of 0.9% from its previous estimate of 12.5% growth.

TSMC gave a more bearish view, saying it expected the global market for foundry chipmaking - contract chip manufacturing - to grow by a high single-digit to low teens percentage this year - lowering a previous forecast of 17% growth.

The company said the global semiconductor market could decline slightly this year, having previously forecast 8% growth.

Apple, a major TSMC client, rescinded its outlook for the first quarter of 2020 saying manufacturing in China had taken longer than expected to resume amid travel restrictions and an extended Lunar New Year break.

Responding to reports that the United States has been pressuring TSMC to build a foundry there to protect its chips from perceived Chinese interference, TSMC said it was “actively reviewing” such a plan, adding that cost, supply chain readiness and talent remained the main issues to address.

Shares in TSMC were down 0.4% before the results. They have fallen more than 13% this year.

($1 = 30.0890 Taiwan dollars)

Reporting By Yimou Lee; Additional reporting by Ben Blanchard and Meg Shen; editing by Robert Birsel and Jason Neely

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