(Bloomberg) — Taiwan Semiconductor Manufacturing Co. raised its forecasts for 2020 revenue and spending, underscoring how surging demand for datacenter chips during the pandemic is helping offset lost business from No. 2 customer Huawei Technologies Co.
Apple Inc.’s main iPhone chipmaker said 2020 revenue will grow by above 20% in dollar terms, an improvement from an earlier forecast of a mid- to high-teens percentage rise in revenue. The company estimated capital spending will be $16 billion to $17 billion this year, higher than an earlier goal of $15 billion to $16 billion.
TSMC raised its outlook after raised its outlook June-quarter profit beat analyst estimates by the widest margin in six years. Net income came in at NT$120.8 billion ($4.1 billion), exceeding the NT$110.6 billion analysts expected on average. TSMC also reported gross margin of 53%, higher than its previous guidance of 50%-52%.
TSMC, a critically important link in the global supply chain, had previously lowered its 2020 revenue outlook to reflect potentially the biggest economic crisis since the Great Depression. But it said at the time it still expects robust demand for semiconductors in datacenters hosting a surge in online activity during the pandemic.
The company expects “the multiyear 5G and HPC application mega-trend to continue to drive demand for our advanced technology for several years,” Chief Financial Officer Wendell Huang said on a conference call.
What Bloomberg Intelligence Says
Sales of Asian contract chipmakers TSMC, SMIC and others may beat consensus in 2H despite the longer-than-expected Covid-19 pandemic, due to rising semiconductor demand for cloud processing and video conferencing amid social-distancing requirements.
– Charles Shum, analyst
Click here for the research.
Shares of the chipmaker fell 1.5% at the close of trading in Taipei, after having surged to a record earlier this week. They are still up about 44% from their March lows amid signs of recovery in demand for the company’s chips.
Its revenue of roughly NT$311 billion, which emerged on Friday when it reported its most recent sales, was already known to have surpassed consensus.
In the longer term, Taiwan’s most valuable company will still have to contend with uncertainty as the coronavirus continues to spread across the globe, particularly as signs emerge of a second wave. TSMC, however, is considered somewhat more resistant to a downturn thanks to its commanding position in the production of high-end chips needed for everything from datacenters and gaming to video streaming.
It’s also the primary producer of cutting-edge chips for Huawei, though the Trump administration’s ban on the use of American chipmaking gear for the Chinese company threatens a business relationship that accounts for about 14% of TSMC revenue. Chairman Mark Liu told shareholders in June that the Taiwanese chipmaker is confident that other customers can replace any business lost because of tightening U.S. curbs on China’s largest tech company.
“The June and 2Q20 sales number also supports our view that near-term momentum will remain healthy, which likely will persist into 3Q20 as well,” Sanford C. Bernstein analysts wrote in a note dated July 10. “Despite the ban on Huawei, we believe the long-term growth drivers such as 5G & share gain in high-performance compute (HPC) applications remain unchanged.”
(Adds revenue, spending forecast in second paragraph.)
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