TSMC's Fourth-Quarter Guidance Misses Estimates on Weak Demand

  • TSMC facing its first quarterly revenue drop in four years
  • Chairman said in July slow inventory depletion not a good omen

Taiwan Semiconductor Manufacturing Co. gave revenue guidance below analysts’ estimates, putting the chipmaker on track for its first quarterly sales drop in four years amid a weak smartphone market.

Fourth-quarter sales will be NT$198 billion to NT$204 billion, the world’s largest customer chipmaker said, compared with estimates for NT$213 billion. 

The surprise announcement comes as the maker for Apple Inc., Qualcomm Inc. and MediaTek Inc. suffers from sluggish global demand for the semiconductors used in smartphones, personal computers and tablet computers. Chairman Morris Chang said in July the slow rate at which chip inventories were declining was “not a very good omen” for fourth-quarter sales.

The company also raised its third-quarter sales outlook to NT$211 billion to NT$213 billion, helped by a more favorable U.S. dollar exchange rate. That compared with a July outlook for sales of as much as NT$210 billion.

“It’s disappointing, even with the benefits of the currency move, and shows there’s weakness in orders from smartphone chip customers like Qualcomm, MediaTek and also non-smartphone players due to slow inventory digestion,” said Mark Li, an analyst at Sanford C. Bernstein. “They will meet their full-year target, but only thanks to the currency move.”

Global smartphone shipment growth will slow this year and average 7.9 percent during the next five years, compared with a 34 percent pace in the previous five years. Sales of all types of devices will decline 1 percent this year, Gartner Inc. said in a report Wednesday.

TSMC’s estimate for third-quarter profitability, measured in gross and operating margins, remains unchanged, it said. Those margins will be similar in the fourth quarter.

Full-year sales growth rate will be close to at least 10 percent, TSMC said in its statement.

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