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TSMC shares end at high since early May on Q3 hopes

2019/07/19 18:04

Taipei, July 19 (CNA) Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) closed up sharply Friday to hit the highest level since early May as the company struck an optimistic tone for the third quarter in an investor conference held a day earlier, according to dealers.

Interest in TSMC shares was also supported after its American depository receipts (ADRs) jumped more than 3.7 percent on the U.S. market overnight in the wake of the upbeat assessment for the July- September period, the dealers said.

TSMC shares closed up 1.97 percent to end at NT$259.00 (US$8.35), off an early high of NT$261.00, with 59.65 million shares changing hands on the Taiwan Stock Exchange, where the benchmark weighted index closed up 0.68 percent at 10,873.19.

Friday's closing level was the highest since May 8, when the stock ended at NT$260.00.

The stock saw strong buying soon after the local equity market opened as investors were encouraged by TSMC's sales guidance for the third quarter that said the company is expected to see an 18 percent increase in sales for the third quarter compared with the second quarter, the dealers said.

The strength continued into the end of the session, despite some profit taking in the late trading session, as market sentiment was also lifted by the chipmaker's repeated comments that it will outperform the global semiconductor industry, as well as the pure wafer foundry business in 2019, the dealers added.

"As its status as the world's largest contract chipmaker, its investor conference was closely watched by investors at home and abroad," Hua Nan Securities analyst Kevin Su said. The 18 percent sequential growth in sales for the third quarter beat an earlier market estimate of about 15 percent.

In addition to the third-quarter sales forecast, TSMC said its gross margin, which reflects the difference between revenue and cost of goods sold, will rise about 4 percentage points from a quarter earlier to 46 percent-48 percent in the third quarter, on the back of rising capacity utilization.

TSMC said it will benefit from strong demand from clients that produce smartphones, high-performance computing devices, the Internet of things and automotive applications.

TSMC said that while there has been uncertainty over the fourth quarter resulting from external factors, it still expects its fourth-quarter sales to continue to grow from the third quarter due to solid demand for 5G smartphones and high-performance computers.

TSMC left unchanged its earlier estimate, which said sales for 2019 will rise slightly from 2018, while the global semiconductor industry will see sales falling 3 percent and the global pure wafer foundry industry will suffer a 1 percent year-on-year drop in sales.

"The forecasts show TSMC's strong lead over its peers in the global semiconductor sector, so a strong showing in its ADRs overnight resulted from strong confidence in the global equity markets," Su said.

TSMC said that since it is gearing up to speed the pace of building up its 5 nanometer process capacity, its capital expenditure for 2019 is expected to top an earlier estimate ranging between US$10 billion and US$11 billion.

Currently, the 7nm process is the latest advanced technology launched for commercial production by TSMC.

In the second quarter, the 7nm process accounted for 21 percent of TSMC consolidated sales, totaling NT$7.75 billion, which beat an earlier estimate of US$7.55 billion and US$7.65 billion. The 10nm process made up 3 percent, and the 16nm process represented 23 percent.

In the three-month period, TSMC posted NT$66.77 billion in net profit, up 8.7 percent from a quarter earlier, with earnings per share (EPS) at NT$2.57, as market analysts attributed the growth to deferred shipments from the first quarter and the company's continued sales to Chinese telecom equipment supplier Huawei Technologies Inc., despite the trade dispute between Washington and Beijing.

In the first half of this year, TSMC's net profit totaled NT$128.16 billion, down 20.9 percent from a year earlier, with EPS of NT$4.94, on sales of NT$459.70 billion, down 4.5 percent from a year earlier.

(By Chang Chien-chung and Frances Huang)Enditem/J