TSMC outlook hit by slowing PC, smartphone growth

Summary:Despite posting a record net profit and revenue in Q2, Taiwan Semiconductor Manufacturing Company is warning of flat margins in Q3 and an inventory build up.

Taiwan Semiconductor Manufacturing Company (TSMC) has posted a record net profit and revenue for its second quarter, but the outlook is gloomy amid weakening demand for PCs and smartphones.

tsmc-outlook-hit-by-slowing-pc-smartphone-growth

For the second quarter, the world's biggest contract chip maker saw net profit rise 24 percent to NT$51.81 billion year on year, above analyst expectations of NT$49.32 billion according to a Wall Street Journal poll. This was on the back of a 22 percent rise in revenue to NT$155.89 billion.

The manufacturer was boosted by strong demand for smartphones in the three months ended June, helping it buffer the decline in PC sales which hit Intel .

TSMC expects third quarter revenue growth to be 3 to 5 percent, after booking 17 percent growth in the second quarter. Part of the decline will be due to a weakening outlook for PC sales, warned chairman Morris Chang, during a news conference Thursday in a WSJ report.

The rise of low-end phones could also drag down profitability, as the company makes about US$9 from selling a chip used in a high-end smartphone, compared with around US$4 for a low-end one.

Chang added sales might decline in the fourth quarter as tech brands try to clear out their remaining inventories.

This was echoed by Lora Ho, TSMC's chief financial officer, in a statement: "While we continue to expect the demand for our advanced technologies to grow strongly, we expect the IC supply chain to begin managing inventories in the second half of this year, which will moderate somewhat the overall demand for our wafers."

tsmc guidance
Weakening PC and high-end smartphone growth clouds outlook for TSMC. (source: TSMC)

 

 

Topics: Hardware, Smartphones

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Loves caption contests, leisurely strolls along supermarket aisles and watching How It's Made. Ryan has covered finance, politics, tech and sports for TV, radio and print. He is also co-author of best seller "Profit from the Panic". Ryan is an editor at ZDNet's Asia/Singapore office.

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