Investors were relatively sanguine about missed first-quarter revenue at Taiwan Semiconductor Manufacturing Co. when the numbers were released earlier this week.
But the maker of chips for smartphones, PCs, games consoles and cars can't always hide behind foreign-exchange fluctuations. In fact, its clients are also to blame for TSMC serving up second-quarter guidance as much as 10 percent lower than estimates.
If Taiwan's fast-rising dollar had stayed where it was, revenue for the coming three months would be 4 percent higher, Chief Financial Officer Lora Ho told investors Thursday. That would have meant sales as high as NT$224.6 billion ($7.4 billion), still NT$6 billion short of what analysts have been predicting.
So where did that about $200 million of chip sales go? Well, it's sitting on customer shelves. A "severe inventory adjustment" is the term executives used. Bit off more than they could chew, is the way I'd describe it.
Communications chips account for about 60 percent of sales at TSMC, and most but not all of that is in smartphones. Chip designers put in orders to TSMC believing (hoping) their smartphone-manufacturing clients would need them.
That didn't happen because there have been few exciting devices launched so far this year, and the one interesting item to hit the market is made by TSMC's nearest rival, Samsung Electronics Co.
This funk looks like it's hurting elsewhere. Qualcomm Inc. is expected to post a 1.9 percent drop in revenue for the June quarter, while Taiwanese rival MediaTek Inc. faces a 6.7 percent decline, analysts estimate. PCs are playing their familiar sad tune, so nobody can bet on that sector for growth. The only part of the industry looking solid is memory chips, according to TSMC, which has almost no exposure in that regard.
The only way out of the rut is for a big client to come up with a big hit. That means Apple Inc. In its 10th-anniversary edition, the new iPhone is predicted to have a smaller bezel, better display and a lot more oomph. There may even be a more expensive model, as fellow Gadfly Shira Ovide wrote last month, which would be good for TSMC because it would mean more chips to supply.
If an iPhone super cycle doesn't pan out, TSMC and its investors will be left hoping the Taiwan dollar drops or some other tech marvel falls from the sky. So, you know, no pressure Apple.
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