After the close of trading today, all eyes will be on Taiwan Semiconductor Manufacturing Co.’s (TSMC's) announced outlook after the world’s largest contract chip manufacturer suffered its worst sales drop in nearly eight years.

TSMC saw sales drop 4.5% year-on-year in the first half, its worst performance since 2011. The company was grappling with the impact of a slowing global smartphone market and efforts by its biggest customer Apple to move beyond hardware. Then the trade war escalated into the U.S. blacklisting Huawei, TSMC’s second-largest customer.

Analysts expect the company’s third-quarter to point to a revival after it took a hit from slowing demand amid U.S.-China trade tensions. At stake is the stock’s $35 billion rebound in market value since a January low.

Leading the way in Q3 will be Apple's ramp up of iPhone manufacturing and a new product cycle from Advanced Micro Devices (AMD) are seen by Bank of America Merrill Lynch analysts to lift sales.

John Tsai, portfolio manager at Eastspring Investments Ltd. in Singapore stated for the report that "The company’s second-half outlook looks to be improving, and third-quarter guidance will probably be strong given that some of the lingering uncertainty has started to fade. The trade spat between Japan and South Korea may also help TSMC, as Samsung Electronics Co. customers such as Qualcomm Inc. may seek to diversify."

On this story, Reuters adds in their report that CEO and Vice Chairman C.C. Wei told analysts during an earnings briefing that "Although our business continues to be impacted by a global slowing economy ... we have also passed the bottom of the cycle of our business and again began to see demand increasing."

Additionally, TSMC Chairman Mark Liu said the dispute between Japan and South Korea of key materials is a major uncertainty for the coming months as it is likely to impact technology supply chains, as Japan dominates the market for the materials in question.

As Patently Apple reported this morning, it's also a concern for Silicon Valley elites such as Apple, Amazon, Google and Microsoft who sent executives to talk to Samsung and others on this trade war that could affect smartphone production and more.

It's a serious enough matter that has even drawn U.S. Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell to step in and say that the U.S. government may have to intervene in the ongoing economic disputes between South Korea and Japan.

Reuters also pointed out that some analysts were cautious on TSMC’s growth outlook for the coming months, citing a slower-than-expected introduction of 5G technology and still-tepid demand for smartphones, which they said accounted for nearly half of its first-quarter sales.

Fubon Securities analyst Sherman Shang wrote in a research note prior to TSMC’s earnings announcement that "With a still-slow demand recovery and excessive inventory, we think wafer orders from fabless companies might remain weak."  

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