Chipmaker TSMC raises capex by up to $5 billion, in the fourth quarter, the sales jump to smart phones

TAIPEI (Reuters) – Apple Inc’s supplier, TSMC, increased its 2019 capital expenditure plan of up to $5 billion on Thursday and forecast a nearly 10% rise in fourth-quarter revenue on strong demand for faster mobile chips, new high-end smartphones and tablets.

The logo of Taiwan Semiconductor Manufacturing Company (TSMC) is to look at an investors’ conference in Taipei, Taiwan, 13 April, 2017. REUTERS/Tyrone Siu

The bullish forecast by the world’s top contract chipmaker convenience of the investors, the fears of a global tech slowdown, as the global economic growth outlook has dimmed due in large part to a 15-month trade war between the United States and China.

“5G, smartphone growth has been stronger than we had expected…We have a good reason to take our investment this year and next year,” TSMC-CEO C. C. Wei, told an earnings briefing after the signing of the Taiwan company, which is the strongest quarterly profit growth in more than two years of age.

Smartphone makers, including Samsung Electronics Co Ltd and Huawei Technologies Co., Ltd are in the race to develop phones with 5G technology, which can be up to 100 times faster than current 4G networks.

TSMC, officially, Taiwan Semiconductor Manufacturing Co. Ltd., which is also Qualcomm Inc., and Huawei increased its 2019 capex to $14 billion and$15 billion on Thursday, from a previous forecast of $10 billion to$11 billion.

It is expected in the fourth quarter, revenue of $10.2 billion and $10.3 billion, up from $9.4 billion a year ago, as well as the company’s gross margin of 48% to 50% as compared to 47.7% in the same period a year ago.

TSMC reported a 13.5% rise in its third-quarter net profit of T$101.07 billion euros ($3.30 billion), the highest rate of increase since the first quarter of 2017, driven by strong sales to smartphone makers.

The results are compared with a T$96.33 billion, the average forecast taken from 20 analysts, according to the Refinitiv of the data.

Sequentially, sales increased 10.7%, to $9.4 billion, compared with its own estimate of $9.1 billion to $9.2 billion.

The sales of the smartphone makers accounting for 49% of total turnover, an increase of 45% a year ago, while sales in China amounted to 20%, an increase of 15%, a modest slowdown in any other major region, including North America and japan.


TSMC shares closed 1% on the Thursday prior to the earnings announcement. They have risen 28% so far this year, giving it a market value of $251.3 billion, which is larger than that of the AMERICAN rival, Intel Corp. (a) $232 million.

The taiwanese company’s strong results come after Huawei, the world’s No. 2 mobile phone maker, said on Wednesday it has shipped 185 million smartphones in the first three months of the year.

In practice, this results in a 29% rise in Huawei’s third-quarter shipments, to take advantage of the promotions and to help to make purchases in China, which more than offset weaker international sales in the U.S. to impose trade sanctions.

The new smartphone launched ahead of the end-of-the-year shopping season, as well as the increasing demand for new technologies, such as 5G, and the use of artificial intelligence will continue to drive sales growth for TSMC’s high-performance chips, it is known as 7nm, the analysts said.

Reporting By Yimou Lee; Writing by Miyoung Kim; Editing by Jane Wardell, Darren Schuettler and Muralikumar Anantharaman

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