Taiwan Semiconductor’s (NYSE: TSM) weak outlook not only sent the stock lower by 9% on the week but it also hurt the semiconductor sector. The $202 billion (by market cap) company blamed weaker demand ahead for high-end smartphones as the reason for the downbeat forecast.
Are TSM’s problems isolated to the company or is the slowing demand endemic for chip stocks?
Taiwan Semiconductor earned $0.59 a share, which is close to the $0.60 consensus forecast. Revenue rose 13% to $8.46 billion. On its conference call, the company explained that the quarter benefited from strong cryptocurrency mining and automotive/IoT. But seasonal declines in smartphone demands hurt results. Further, TSMC forecasts 2018’s revenue will be negatively hurt by smartphone weakness.
Revenue will grow by 10% instead of the 10%-15% forecast previously.
Not everything is slowing: silicon content in smartphones keep increasing as facial recognition, AR, VR, and 3D video get added to the latest phones.
Takeaway
TSMC is signaling two negative headwinds for semiconductor companies: a slowdown in crypto mining, due to unstable prices and a flood of ASICs creating excess supply for hardware mining will hurt growth. The smartphone peak refresh cycle is now over until later this year to early next year. Expect stocks like Micron (NASDAQ: MU), Applied Materials (NASDAQ: AMAT) either underperforming or getting stuck in a trading range in the months ahead.
