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25 September 2015

Smartphone slowdown to drive TSMC to first quarterly drop since 2011

The pressures on the smartphone market were thrown into sharp relief by a revenue warning from the world’s largest foundry, TSMC.

The Taiwanese giant said its fourth quarter revenue would come in below market expectations (between NT$198bn and NT$204bn, rather than the anticipated NT$213bn), and that it was bracing itself for its first quarterly fall in sales for four years.

TSMC is expected to hit its full year targets, but only because of the currency exchange effect. It said it was still expecting annual sales growth of about 10%.

It placed the blame on slow global demand for smartphones, PCs and tablets. Chairman Morris Chang had already warned in July that chip inventories were declining at a slow rate round the world, which was “not a very good omen” for TSMC’s Q4 results. However, the firm did raise its Q3 sales outlook to a range of NT$211bn to NT$213bn, up from NT$210bn, mainly because of an improved US dollar exchange rate.

Mark Li, an analyst at Sanford Bernstein, told EETimes: “It’s disappointing, even with the benefits of the currency move, and shows there’s weakness in orders from smartphone chip customers like Qualcomm, MediaTek and also non-smartphone players due to slow inventory digestion.

TSMC’s estimate for third quarter gross and operating margins remains unchanged and will be similar in the fourth quarter.