TSMC39;s Jan19 revenue decreas

TSMC (2330-TW) announced today on February 15th that its Jan19 revenue was NTD78.094bn (-13.1% MoM, -2.1% YoY, setting a 6-months low. TSMC told that the case of using unqualified chemical materials and affect the wafer production yield in 14B will not affect 1Q19 guidance. TSMC's is expected to achieve its 1Q19 target.

Due to weak sales of Apple's iPhone, the utilization rate of 7nm declined. The inventory level in semiconductor industry is still high, and still needs time to digest. TSMC estimated that its 1Q19 revenue may reach US$7.3-7.4bn (-21-22% QoQ). To denominated in NTD, its 1Q19 revenue may reach NTD2233.8-2 264.4bn (-21.9-22.9% QoQ).

The number of working days decreased due to Lunar New Year in February. TSMC’s Mar19 revenue is expected to increase MoM. According to institutional investors, the case of using unqualified chemical will not affected TSMC’s 1Q19 guidance and TSMC's is expected to achieve its 1Q19 target.

After TSMC’s earnings report in mid-January, foreign investors including Citigroup Global, Nomura, JP Morgan and others, revised down the target prices. JP Morgan pointed out that TSMC’s 1Q19 revenue may fall by 22%, the decline magnitude is higher than expectation. In addition, the company may enter low-season in 2Q19. Its 1H19 earnings performance may be disappointing.

However, TSMC expected that its FY19 revenue may grow slightly YoY. C.C. Wei, President of TSMC stressed that the company’s FY19-21 CAGR may reach 5-10% as it is expected. Institutional investors expects that TSMC’s FY20 and FY21 revenues are expected to have a double-digit growth and return to a strong growth.

Wei told that TSMC’s 1H19 revenue is expected to decline YoY and its 2H19 revenue is expected to grow significantly. Its FY19 revenue is still expected to grow, outperforming sector average slightly. TSMC’s revenue/earnings growth momentum may mainly come from 7-nm process, including the demand of communication chips, high performance computing and others.