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Impact of Apple’s New iPhones on TSMC’s Fiscal H2 2018 Revenue

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Estimated iPhone shipments for Q4 2018

The production of TSMC (TSM), Apple’s (AAPL) sole foundry, was affected for four days due to a computer virus outbreak. This could probably be one of the reasons for a one-month delay in the launch of iPhone XR. DigiTimes, citing Apple supply chain sources, stated that shipments of new iPhones are expected to hit 70 million to 75 million units by the end of 2018, its highest since the iPhone 6 launch in 2014.

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Apple is not the only beneficiary of TSMC’s 7-nm node

Apple’s A12 processors are the first 7-nm (nanometer) processors to launch commercially. However, Apple is not the only company building 7-nm chips. TSMC could also use its 7-nm process node to manufacture products for Apple’s competitors like Kirin 980 chipsets for Huawei’s Mate 20 flagship series scheduled to launch in October 2018 and Qualcomm’s (QCOM) Snapdragon 855 SoC (system on chip) scheduled to launch in early 2019.

TSMC could also use its 7-nm node to manufacture Advanced Micro Devices’ (AMD) Vega graphics processing units scheduled to launch by the end of 2018. The foundry expects 7 nm to contribute 20%, or $7 billion, towards its fiscal 2018 revenue.

Apple’s move to Intel’s modem

On one hand, TSMC would benefit from higher iPhone shipments, but on the other hand, it would lose Intel’s (INTC) order to produce iPhone modems. Intel would manufacture its new XMM 7560 modem for the new iPhones in-house on its 14-nm process node. However, TSMC would continue to manufacture Intel’s older version modems used in iPhone 7 and iPhone 8.

Impact of Apple’s iPhones on TSMC’s revenue

Based on the above factors, TSMC’s revenue is expected to rise 5.1% sequentially but fall 0.9% YoY (year-over-year) to $8.25 billion in fiscal Q3 2018 as virus outbreak is expected to eat up $225 million in the quarter’s revenue. For fiscal Q4 2018, its revenue is expected to rise 24% sequentially and 11% YoY to $10.25 billion due to high shipment volumes and the $225 million recovery revenue from the previous quarter.

Next, we will look at the impact of new iPhones on Apple’s competitor and supplier Samsung.

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