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TSMC Announces Weak Guidance due to Softer Phone Demand

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) announced cutting its full-year revenue target on softer demand for smartphones.

Forecast range for the 2nd quarter is $7.8 billion to $7.9 billion. It was below Wall Street estimate of $8.8 billion.

“Moving into 2nd quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining,” Chief Financial Officer Lora Ho said.

TSMC is the world’s largest semiconductor foundry company. It manufactures chips for leading technology companies such as Apple, Nvidia, and Qualcomm.

iphone x displayed on a clear stand on a table and two people in the background
Apple’s iPhone X’s chip are manufactured by TSMC.

A number of analysts read a prediction of softer-than-expected smartphone demand as driven concern about demand for iPhones. Apple is believed to account for about 20% for the revenue of TSMC.

“Apple represents nearly 20% of TSMC’s revenue so the outlook potentially points to weaker-than-anticipated iPhone demand,” James Cordwell, analyst at Atlantic Equities, told Reuters.

Moreover, some Apple suppliers will likely see choppiness into June due to weakness in handset sales, said Barclays. Mizuho Securities USA also said it sees limited upside to 2018 iPhone unit shipment estimates.

Similarly, Morgan Stanley said iPhone was a big reason for TSMC’s poor guidance.

“Smartphone semi weakness [is] the main reason for the revenue shortfall,” Charlie Chan, analyst at Morgan Stanley wrote.

“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.”

Meanwhile, TSMC blamed “softening” demand in the smartphone market. It was also being more conservative over the cryptocurrency mining industry for its weak forecast.

The chipmaker giant said it had 56% market share of the global chip foundry market last year. Its revenue split for 2017 was 10% from computers, 59% from communications, 8% from consumer products, and 23% from the industrial sector.

TSMC Triggered Selloff on Wall Street

TSMC triggered a selloff in chipmakers and tech stocks from European to Asian Markets. As the main manufacturer of Apple, its revenue forecast revived fears that the iPhone X may already be losing momentum a quarter after its release.

Apple closed down 2.83% to 172.80 and it was the biggest fall on the tech-heavy Nasdaq index.

Apple suppliers including Qualcomm Inc, Intel Corp, Qorvo Inc, Skyworks Solutions Inc, and Broadcom Inc, fell by 2% to 5%.

Additionally, US-listed shares of TSMC were down 6%. Other chipmakers including Applied Materials Inc and Lam Research Corp dropped about 5%, and ASML Holding NV shed 3.6%.

Elsewhere, in Korea, Samsung Electronics Co lost 2.2%, and SK Hynix plunged 4%. Shares of Japanese semiconductors equipment and silicon wafer makers Tokyo Electron Ltd and Alps Electric Co also lost their grounds.

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