TSMC's Profits are Expected to Decline

[AlphaAtlas]

The Taiwanese news outlet Digitimes seems to have many sources in the chipmaking industry, and according to their cited "market observers," Taiwain Semiconductor is expected to post their first annual profit drop in 8 years. For reference, both Nvidia and AMD manufacture their latest GPUs on TSMC's 12nm and 7nm processes, respectively, but the introduction of more 7nm products from both companies this year allegedly won't be enough to sustain growth. The report claims that "disappointing" sales of new iPhones and a "cutback in orders placed by GPU firm Nvidia" will more than offset a "ramp-up in orders for 7nm chips from HiSilicon, Qualcomm and AMD."

TSMC already described 2019 as "a slow year" for its operations and also the overall semiconductor market, citing macroeconomic uncertainty, and disappointing high-end smartphone sales that have led to inventory pile-ups in the supply chain. The use of substandard photoresist chemicals that disrupted its 12/16nm chip production at Fab 14B earlier this year is set to have a further impact on the foundry's performance this year. The photoresist material incident has prompted TSMC to cut its revenue estimate for the first quarter to NT$7-7.1 billion from NT$7.3-7.4 billion. The impact will also reduce TSMC's gross margin by 2.6pp, operating margin by 3.2pp, and EPS by NT$0.42, the foundry disclosed previously. TSMC said the wafers scrapped will be made up in the second quarter. But the incident is expected to reduce its gross margin by 0.2pp, operating margin by 0.2pp, and EPS by NT$0.08 in all of 2019.

 

[Methos]

This is Tim Apple's fault.

 

[Lakados]

Doesn't help that they pumped out a full month and change of bad silicon from one of their larger plants, that is a lot of cash to set aside for the inevitable failures that are going to come their way.

 

[power666]

Doesn't help that they pumped out a full month and change of bad silicon from one of their larger plants, that is a lot of cash to set aside for the inevitable failures that are going to come their way.

This is exactly what I was thinking. More than a full month of bad products rolling of the line has to hurt. I wonder if any of those customers were able to get refunds instead of replacements for their orders. As odd as it sounds, such an agreement could work for both parties if customers were already wanting to reduce orders. For those who didn't, it'd be free up space on the production line to catch up.

 

[Lakados]

This is exactly what I was thinking. More than a full month of bad products rolling of the line has to hurt. I wonder if any of those customers were able to get refunds instead of replacements for their orders. As odd as it sounds, such an agreement could work for both parties if customers were already wanting to reduce orders. For those who didn't, it'd be free up space on the production line to catch up.

Yeah, but no matter how it plays out for them it is one hell of a loss to write off it basically ruined an entire financial quarter for them and the remaining ones are just them playing catch up. I would have to imagine they are seriously investigating how this happened and my money is industrial sabotage.

 

[OFaceSIG]

It mentions the bad photo resist incidents in article. 7.4 to 7.1 billion in one quarter. First quarterly drop in 8 years. Meaning they've been rolling in the billions for years. They're doing just fine. It reminds me when Starbucks posted it's first revenue dip a few years ago at literally 1%. The stock market jockies treated it like the end of the world.

 

[Unter Dog]

Let's hope the semiconductor suppliers catch up based on this news. I've been signing off on 20 deviations a week to keep production running.