TSMC’s business at a glance
Taiwan Semiconductor Manufacturing Company (TSM) was founded in 1987 with a commitment to not compete with customers on chip designs and focus only on manufacturing. This vision gave way to a new segment of fabless chip designers, including Qualcomm and NVIDIA (NVDA). Over the years, TSMC grew to become the third-largest semiconductor company with annual revenue of $32 billion.
This year saw TSMC overtake Intel (INTC) in the manufacturing technology space by transitioning to the 7 nm (nanometer) node. Before shifting to the new 7 nm manufacturing process, TSMC faced a difficult time in the first half of 2018.
The first half of the year is seasonally weak for TSMC, as orders from Apple (AAPL) fall. In the second quarter, TSMC’s revenue rose 11.2% YoY (year-over-year) but fell 7.2% sequentially to $7.85 billion, the midpoint of its guidance. Its YoY revenue growth was driven by strong demand from cryptocurrency in April, which offset the decline in the smartphone segment. However, crypto demand faded in June, which led to a sequential revenue fall.
In the second quarter, TSMC’s communications revenue fell 14% sequentially as Apple cut its iPhone production due to lower sales of its iPhone X. However, TSMC’s computer revenue rose 34% sequentially as NVIDIA increased its GPU (graphics processing unit) supply to meet crypto miners’ demand. The two segments together accounted for 69% of TSMC’s revenue.
TSMC’s revenue in the first half of 2018 rose 7.5% YoY to $16.2 billion.
The second half of the year is seasonally strong for TSMC, as this is when Apple and NVIDIA tend to launch their flagship products. Because the first half of 2018 was weaker-than-expected, TSMC lowered its 2018 revenue growth guidance from 10% to 7%–9%. This was the second time it reduced its guidance for the year. In the first quarter, the foundry lowered its 2018 revenue growth estimate from 10%–15% to 10%.
Next, we’ll look at TSMC’s revenue guidance for the second half of 2018.