Taiwan Semiconductor Manufacturing Co is sticking with plans for aggressive capital investments in 2020, a sign from the technology bellwether of resilient demand despite a pandemic-induced downturn.
TSMC, a barometer for the tech industry thanks to its heft in the global supply chain, on Thursday lowered its revenue outlook for the year by a few percentage points to reflect the new Covid-19 reality. But it still expects robust demand for the semiconductors in datacenters that are now hosting an unprecedented surge in online activity. On Thursday, executives adhered to their goal of ear-marking $15 billion to $16 billion for capital spending in 2020, up from last year’s $14.9 billion. And they forecast revenue growth of about 30% this quarter.
In the longer term, the chipmaker to Apple Inc. and Huawei Technologies Co. will still have to contend with uncertainty as Covid-19 spreads across the globe. Taiwan’s largest company however is relatively more resistant to a downturn thanks to a commanding position in the production of high-end chips needed for everything from datacenters and gaming to video streaming. It also makes semiconductors for laptops, phones and other devices that people are buying for home offices.
The world’s largest contract chipmaker said on Thursday it expects revenue of between $10.1 billion and $10.4 billion from April to June. That forecast followed a near-doubling of net income to NT$116.99 billion ($3.9 billion) for the three months ended March, when demand for advanced silicon remained steady during the pandemic. That helped offset a 9% quarter-on-quarter slide in revenue from smartphones. Executives hedged their outlook for revenue this year on Thursday, saying it will rise by a mid- to high-teens percentage from a previous forecast for growth of more than 17%.
“We don’t see any significant reduction in our customer demand. But we do expect the end-demand will have some impact in the second half of this year,” Chief Executive Officer C.C. Wei told analysts on a conference call.
TSMC’s revenue rose 42% in the first quarter to NT$310.6 billion, based on previously reported monthly numbers. That’s despite top customer Apple withdrawing its revenue outlook for the current quarter because of work slowdowns and lower demand in China, its biggest international market. But official data showed iPhone shipments in China jumped 19% in March, suggesting demand was bouncing back in the world’s top smartphone arena, at least compared with the previous-generation iPhone.
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Beyond a potential economic downturn, TSMC may also have to contend with fallout from the U.S.-China trade war.
Washington is said to be considering curbs on TSMC’s sales to Huawei, which relies on the chipmaker to produce its most advanced silicon. China’s biggest tech company, which the U.S. accuses of aiding Beijing in espionage, accounts for about 10% of the Taiwanese chipmaker’s revenue. TSMC Chairman Mark Liu has downplayed the risk to its business, saying growth will still come from a global 5G roll-out.
”We do sense there is an urgency from the industry that having the rule changed will hurt the U.S. semiconductor community. And we share the same opinion,” Wei said.
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