Picture: 123RF/sashkin7
Picture: 123RF/sashkin7

Taipei  — Taiwan Semiconductor Manufacturing  Company (TSMC) projected quarterly revenue well above analysts’ estimates, brushing aside concerns that tighter US sanctions on No 2 customer Huawei Technologies  could dampen its business.

Shares in the world’s largest contract chipmaker have slid two straight days on worries that Washington will tighten existing restrictions on exports to Huawei, potentially curtailing shipments from TSMC and other non-American firms. If the US does move ahead, any disruption would be short-term because TSMC could replace some of the lost Huawei business with orders from other customers thanks to the 5G boom, chair Mark Liu said this week during a post-earnings conference with analysts.

TSMC has recruited Intel’s former chief lobbyist to gauge the temperature in Washington and lessen any fallout from US-Chinese tensions, including policies involving Huawei.

“We are prepared to deal with this export control regulation,” Liu said, adding that if any new controls were introduced, TSMC would carefully “evaluate product by product eligibility of export.”

But some analysts judged Liu’s assessment too rosy. TSMC may be overestimating the ability of other customers to pick up the slack were its Huawei business to be curtailed, Bernstein analyst Mark Li said. “The forecast, according to TSMC, assumes ‘business as usual’. The company sees any disruption will be short-lived and for example commented that smaller telco infrastructure suppliers can quickly pick up the shortfall if Huawei can’t deploy 5G as planned. We find that too optimistic,” Li said.

TSMC reported better-than-expected net income of NT$116bn ($3.9bn) in the December quarter. Gross margins came in at 50.2%, also exceeding estimates. It forecast revenue of $10.2bn to $10.3bn in the March quarter, surpassing estimates for $9.6bn.

Apple’s main chipmaker is banking that the rollout of fifth-generation enabled smartphones in 2020 will galvanise growth. Semiconductor orders from Huawei account for 10% of its revenue, according to Bloomberg data.

TSMC’s robust results demonstrate how the world’s largest contract chipmaker is investing in technology to safeguard its market lead over Samsung Electronics  and Intel. TSMC spent almost $15bn on technology and capacity in 2019 and is prepared to shell out as much as $16bn in 2020, anticipating the advent of fifth-generation smartphones. The company, a barometer for the tech industry thanks to its heft and place in the supply chain, has said the advent of 5G will result in more chips in devices than before.

Capex growth in 2020 will mainly come from an increase in specialty technology including CMOS sensors — which turn light into digital signals for smartphone cameras — and power management chips, and packaging technology, according to CFO Wendell Huang.

TSMC previously reported record fourth-quarter revenue of NT$317.2bn. CEO CC Wei has expressed hopes that the emergence of 5G, the foundation of future technologies from automated factories and smart homes to faster consumer electronics, will underpin its business in coming years.

In addition to 5G, TSMC’s counting on growing demand for high-performance computing. Positive comments from Micron Technologies  and Samsung suggest the global semiconductor market is poised for a gradual recovery on the back of demand related to 5G, artificial intelligence and automotive applications.

Bloomberg