At first glance, a 1.5 percent miss in quarterly sales doesn't seem like a big deal.
But when the results are for Taiwan Semiconductor Manufacturing Co., a company whose history of hitting its outlook target rivals a Marine sniper, that figure is significant.
TSMC makes chips on-spec for clients including Apple Inc. and Qualcomm Inc. Its incredible predictive abilities come from the fact that orders are placed as many as three months in advance, which means TSMC already knows how much customers will be spending for that quarter by the time it releases guidance midway through the period.
What TSMC can't predict, however, is currency fluctuations. Instead of weakening about by 0.7 percent, as TSMC had modeled, the average Taiwan dollar rate strengthened by almost 2 percent during the first quarter. (TSMC guidance and earnings are based on average exchange rates during the period.)
Currency fluctuations have always been part of business, and TSMC was even a beneficiary last year. Yet a gain of more than 6 percent in the Taiwan dollar from January to March 31 marked the biggest quarterly rise in at least six years, well beyond the swings to which companies are accustomed.
Instead of sales beating by about 1 percent, TSMC posted its largest shortfall versus analyst estimates in eight years.
Don't think TSMC will be alone. While Taiwanese companies run their accounts and report earnings in local currency, most technology pricing and transactions are done in dollars. That means you can expect more forex-related surprises as this season's earnings roll out.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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Tim Culpan in Taipei at firstname.lastname@example.org
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