Chipmaker TSMC raises capex by up to Us$5bil

TAIPEI: Apple Inc supplier TSMC raised its 2019 capital spending plan by up to Us$5bil yesterday and forecast a nearly 10% rise in fourth-quarter revenue on strong demand for faster mobile chips and new high-end smartphones.

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

“5G smartphone growth momentum is stronger than we expected... We have good reasons to increase our capex this year and next year,” TSMC CEO C.C. Wei (pic) told an earnings briefing after reporting the Taiwanese company’s strongest quarterly profit growth in more than two years.

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

TSMC, formally Taiwan Semiconductor Manufacturing Co Ltd, whose clients also include Qualcomm Inc and Huawei, raised its 2019 capex to Us$14bil-us$15bil yesterday from an earlier forecast of Us$10bil-us$11bil.

It expected fourth-quarter revenue of between Us$10.2bil and Us$10.3bil, up from Us$9.4bil a year ago, and gross margin at 48%-50% versus 47.7% in the same period a year ago.

TSMC reported a 13.5% rise in third quarter net profit to Nt$101.07bil (Us$3.3bil), its strongest growth since the first quarter of 2017, thanks to strong sales to smartphone makers.

The profit figure compared with a Nt$96.33bil average forecast drawn from 20 analysts, according to Refinitiv data.

Revenue rose 10.7% to Us$9.4bil, compared with the company’s own estimate of Us$9.1bil to Us$9.2bil.

Sales earned from smartphone makers accounted for 49% of its total revenue, up from 45% from a year ago, while China sales amounted to 20%, up from 15%, making up for modest slowdown in every other major region including North America.

TSMC shares closed down 1% yesterday prior to the earnings announcement. They have risen 28% so far this year, giving it a market value of Us$251.3bil, bigger than US rival Intel Corp’s Us$232bil.

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

That implies a 29% surge in Huawei’s third-quarter shipments, as it benefitted from promotions and patriotic purchases in China that more than offset weak international sales on US trade sanctions.

New smartphone launches ahead of the year-end shopping season, as well as rising demand for new technologies such as 5G and artificial intelligence will continue to drive sales for TSMC’S high-performance chips, known as 7nm, analysts said. — Reuters