An Irrational Leap by Bloomberg that Slower iPhone Sales is to Blame for TSMC's Conservative Forecast is a Hyped Stretch
On Monday Goldman Sachs pointed to 'rapidly slowing' iPhone demand in China and warned that earnings could fall short. Despite a top Apple analyst predicting that Apple's iPhone XR would be a smash hit in China, news directly from TSMC's earnings forecast has rattled some into believing Apple's iPhone sales are slower than expected. But is that true?
While speculation will run rampant that TSMC's forecast is a reflection of iPhone demand, Apple only represents 20% of TSMC's total revenue. While 80% is from other smartphone makers and industry players including Huawei, Qualcomm, Broadcom, NVIDIA and more. Qualcomm is TSMC's second largest customers.
Are Android smartphone OEM's cutting back on orders? While that is a real possibility, it's Apple that always gets the bad news headlines if TSMC forecasts a lower earning picture, even in light of currency issues and beyond.
Bloomberg wasted no time jumping on TSMC's latest financial forecast to point to Apple having problems.
Bloomberg reports that "Taiwan Semiconductor Manufacturing Co. forecast revenue below analysts' estimates, as the sole supplier of Apple Inc.'s iPhone processors grapples with a stalling global smartphone market." Wow, Bloomberg's opening statement points to Apple being TSMC's main problem. But is that so?
After that bombastic statement, reality begins to surface with Bloomberg looking to other possible problems in the market such as currency issues, demand for semiconductors use to mine Bitcoin and building trade tensions between China and the U.S.
Mark Li, an analyst with Sanford C. Bernstein stated for the Bloomberg report that "TSMC may by offering a conservative forecast intentionally due to macroeconomic uncertainties." He didn't point to Apple as the sole company behind TSMC's new forecast.
The report further noted that "TSMC's mobile phone business should grow in the mid-single digits over the coming five years, Wei told reporters Thursday.
TSMC executives said that revenue from its most advanced chipmaking processes will account for less than $1 billion of the company's total in 2019. Bloomberg decided to interpret that as "That's a sign that high-end customers, which include the likes of Apple, crypto-mining giant Bitmain and Huawei Technologies Co., may not be adopting the technology as quickly as expected after TSMC spent billions rolling it out." Say what? Apple and Huawei are the only customers that have adopted 7nm as soon as it was available. So what is Bloomberg talking about? Read the full Bloomberg report here for more.
The real numbers that were announced today reflect Q3 results. That means orders for chips were made in Q3. So if Q3 was positive for TSMC, it doesn't mean Apple is hurt TSMC. In fact the data below shows nothing but positives.
As noted earlier, the forecast has many variables that are contributing to TSMC being cautious going forward. It doesn't directly prove that Apple, who is 20% of TSMC's business, is behind the conservative forecast.
Digitimes reported this morning that "The third-quarter revenues increased 3.3% on year while net income and diluted EPS both decreased 0.9%, according to the pure-play foundry.
Compared to second-quarter 2018, the third-quarter results represent an 11.6% increase in revenues and a 23.2% increase in net income.
In US dollars, third-quarter revenues came to US$8.49 billion, which increased 8.1% from the previous quarter and 1.9% year-over-year.
TSMC expects its fourth-quarter sales to reach US$9.35-9.45 billion, up from US$9.21 billion recorded in the same period of 2017.
In the end, if Bloomberg isn't giving Apple credit for TSMC's positive quarter in any way shape or form, why are they so quick to blame TSMC's conservative forecast on an imaginary iPhone sales slowdown? Until Apple's Q1 (calendar Q4) financials are out, no one knows what Apple's iPhone sales will end up looking like.
Pre-orders of Apple's iPhone XR begin tomorrow.