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U.S. brokerage keeps 'neutral' rating on TSMC shares

2018/06/23 19:00:49

Taipei, June 23 (CNA) A U.S.-based brokerage has maintained its "neutral" rating on shares of Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, citing slower growth forecasts due to a reduction in orders from the company's major client Apple Inc.

Citing a recent report in the Taipei-based Economic Daily News, the brokerage noted the forecast 5-10 percent sequential growth of TMSC's third-quarter sales was well below an earlier market estimate of 15-20 percent.

According to the newspaper, its third-quarter forecast was based on Apple's decision to cut orders to TSMC, which reportedly supplies A12 processors for the next generation iPhones.

The U.S brokerage said that if TSMC sales are weaker than expected in the July to September period, which is usually a high season for the global semiconductor industry, the chipmaker will not achieve its 2018 sales growth target of 10 percent.

As a result, the brokerage said, it was keeping its "neutral" rating on shares of TSMC and its target price of NT$239 (US$7.89).

In addition, the brokerage said, progress on the development of TSMC's advanced 7 nanometer process has been compromised by a weaker than expected yield rate, which means mass production of processors for the new iPhones could be delayed until August.

A plunge in the value of cryptocurrencies has also affected demand for TSMC's chips for the mining devices used in cryptocurrency transactions, such as application-specific integrated circuits (ASICs), the brokerage said.

It said investors should wait for TSMC's second-quarter results, which are expected in mid-July, before deciding whether to trade the stock.

CNA cannot identify the U.S. brokerage because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or for the wider market.

On Friday, shares of TSMC, the most heavily weighted stock on the local market, fell 0.4 percent to close at NT$227.50 on the Taiwan Stock Exchange, which ended down 0.38 percent.

The stock has been in consolidation mode in recent sessions, fluctuating between NT$224.00 and NT$232.00, amid concerns over escalating trade tensions between the United States and China.

(By Jeffrey Wu and Frances Huang)
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