Yahoo Finance Weak Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) Q2 Guidance Rattles Apple Inc. (NASDAQ:AAPL) Investors
Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) issuing a weaker than expected guidance for the June quarter continues to raise serious concerns about Apple Inc. (NASDAQ:AAPL)’s Q2 Prospects. The Asian Chip Manufacturer is the largest semiconductor foundry company whose operations and products affect a good number of tech giants. The chip maker has been the sole supplier of A-series chips for the iPhone maker.
TSMC Guidance
A lower than expected guidance already hints to the possibility of the chip maker receiving a reduced number of orders from the iPhone maker. iPhone X sales are already under pressure, and the TSMC guidance only goes to fuel suggestions that the slump might be more than pronounced.
TSMC says it expects its second-quarter revenue to come in between $7.8 billion and $7.9 billion, representing a year over year increase of 11% and 12%. However, it is slightly below consensus estimates of $8.77 billion. For the first quarter, the company reported revenues of $8.46 billion.
The company has also reduced its full-year revenue growth forecast to 10% from an initial range of between 10% and 15%. The company has also warned that it does not expect a lion share of its chips revenues to come from the next-gen 7-nanometer manufacturing process. The sentiments have affirmed suggestions of weakness from Apple demand, given that the iPhone maker accounts for a considerable chunk of TSMC’s 7nm revenue.
Slowing Smartphone Sales
TSMC has blamed softening demand in the high-end smartphone market for the weak guidance. The guideline further underlines concerns about iPhone X which has failed to live up to expectations when it comes to sales.
“Smartphone semi-weakness [is] the main reason for the revenue shortfall. Besides the order cuts from the current Apple iPhone X processor, we attribute the major revenue shortfall in the smartphone segment to key customer MediaTek … and around a month’s delay of Apple’s new 7nm processor to July,” analyst Charlie Chan wrote in a note to clients Thursday.
The concerns raise serious questions about Apple’s steep pricing of iPhone X, which is cited as one of the reasons behind sluggish demand. Given the high levels of smartphone saturation in developed markets, more than ever the iPhone maker needs to venture into emerging markets if it is to continue enjoying healthy demand as was the case in the past.
However, with a pricing of above $1,200 for an iPhone it is becoming increasingly clear that the company may not be able to reinvigorate demand as expected.
Apple shares dropped 2.8% in response to the TSMC warning with NVIDIA Corporation (NASDAQ: NVDA) which is another chip player tanking 3.1%. TSMC shares fell 5.7%.
Despite diversifying its operations into the cryptocurrency mining space, TSMC depends on Apple for a good chunk of its revenues. Its competitive edge over Samsung on smaller processes has been one of the reasons why the iPhone maker has stuck with it as its primary supplier.
The company is currently working on 5nm chips slated for release in 2020 and 3nm slated for 2020. TSMC controlled 56% of the global chip foundry market in 2017 with 10% coming from computers, 59% from communications, and 8% from consumer products. Industrial sector chips accounted for 23%.
This article was originally posted on FX Empire
