Apple supplier TSMC raised its 2019 capital spending plan by up to $5 billion on Thursday and forecast a nearly 10 percent rise in fourth-quarter revenue on strong demand for faster mobile chips and new high-end smartphones, Reuters reported.
The bullish forecast by the world’s top contract chipmaker should ease investor fears of a global tech slowdown, as the world economic growth outlook has dimmed largely due to a 15-month trade war between the United States and China.
“5G smartphone growth momentum is stronger than we expected… We have good reasons to increase our capex this year and next year,” TSMC CEO C.C. Wei told an earnings briefing after reporting the Taiwanese company’s strongest quarterly profit growth in more than two years.
Wei said TSMC almost doubled its forecast for 5G smartphone penetration for 2020 to mid-teen percent from a forecast of single digit made six months ago.
Smartphone makers including Samsung Electronics and Huawei Technologies are racing to develop phones enabled with the 5G technology, which could be up to 100 times faster than current 4G networks.
TSMC, formally Taiwan Semiconductor Manufacturing, whose clients also include Qualcomm and Huawei, raised its 2019 Capex to $14 billion-$15 billion from an earlier forecast of $10 billion-$11 billion.
It expected fourth-quarter revenue of between $10.2 billion and $10.3 billion, up from $9.4 billion a year ago, and gross margin at 48 percent-50 percent versus 47.7 percent in the same period a year ago.
TSMC reported a 13.5 percent rise in third quarter net profit to T$101.07 billion ($3.30 billion), its strongest growth since the first quarter of 2017, thanks to sales to smartphone makers.
Revenue rose 10.7 percent to $9.4 billion, compared with the company’s own estimate of $9.1 billion to $9.2 billion.
Sales earned from smartphone makers accounted for 49 percent of its total revenue, up from 45 percent from a year ago, while China sales amounted to 20 percent, up from 15 percent, making up for modest slowdown in every other major region including North America.
The Taiwan company’s strong results come after Huawei, the world’s No.2 smartphone maker, said on Wednesday it has shipped 185 million smartphones in the first nine months of the year.
That implies a 29 percent surge in Huawei’s third-quarter shipments, as it benefited from promotions and patriotic purchases in China that more than offset weak international sales on U.S. trade sanctions.