(Bloomberg) – Taiwan Semiconductor Manufacturing Co. raised its revenue and expense forecasts for 2020, underscoring how the growing demand for data center chips during the pandemic is helping to offset the loss of business by customer number 2 Huawei Technologies Co.
Apple Inc.’s leading iPhone chipmaker said 2020 revenue will grow above 20% in dollar terms, an improvement on an earlier forecast of a percent increase in revenue for mid-to-high teens. The company estimated that capital spending will be $ 16 billion to $ 17 billion this year, more than a previous target of $ 15 billion to $ 16 billion.
TSMC raised its outlook after increasing its outlook, earnings for the June quarters exceeded analyst estimates by the widest margin in six years. Net income reached NT $ 120.8 billion ($ 4.1 billion), exceeding the NT $ 110.6 billion that analysts expected on average. TSMC also reported a 53% gross margin, higher than its previous guidance of 50% -52%.
TSMC, a critically important link in the global supply chain, had previously narrowed its 2020 revenue outlook to potentially reflect the biggest economic crisis since the Great Depression. But he said at the time that he still expects strong demand for semiconductors in data centers that harbor an increase in online activity during the pandemic.
The company hopes “the multi-year 5G and HPC application megatrend will continue to drive demand for our advanced technology for several years,” Chief Financial Officer Wendell Huang said in a conference call.
What Bloomberg’s Intelligence Says
Sales by Asian contract chip makers TSMC, SMIC and others may reach consensus in 2H despite the longer-than-expected Covid-19 pandemic, due to rising demand for semiconductors for cloud processing and video conferencing in through the requirements of social distancing.
– Charles Shum, analyst
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Shares of the chip maker fell 1.5% at the close of operations in Taipei, after climbing to a record earlier this week. They still rose approximately 44% from their March lows amid signs of recovery in the company’s chip demand.
Its revenue of approximately NT $ 311 billion, which emerged on Friday when it reported its most recent sales, was already known to have surpassed the consensus.
In the long term, Taiwan’s most valuable company will still have to contend with uncertainty as the coronavirus continues to spread around the world, particularly as signs of a second wave emerge. However, TSMC is considered somewhat more resilient to a recession thanks to its dominant position in producing high-end chips needed for everything from data centers and games to video streaming.
It is also the leading producer of cutting-edge chips for Huawei, although the Trump administration’s ban on the use of U.S. chip-making equipment for the Chinese company threatens a business relationship that accounts for about 14% of TSMC’s revenue. President Mark Liu told shareholders in June that the Taiwanese chipmaker is confident that other customers can replace any business lost due to the United States’ restriction to China’s largest technology company.
“The June and 2Q20 sales number also supports our view that short-term momentum will continue to be healthy, which will likely persist in 3Q20 as well,” analysts at Sanford C. Bernstein wrote in a note dated 10/10. July. “Despite Huawei’s ban, we believe that long-term growth factors such as 5G and gain in participation in high-performance computing (HPC) applications remain unchanged.”
(Add income, expense forecast in the second paragraph).
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