Apple shares take hit as iPhone chipmaker TSMC forecasts $1B dip in revenue
Apple's share price dropped about three percent during pre-market trading going into Thursday on word that TSMC -- the manufacturer of A-series processors for iPhones and iPads -- is expecting about $1 billion less revenue for the second quarter than Wall Street forecasts.
The iPhone X and its core, the TSMC-produced A11 Bionic chip.
TSMC's guidance for the quarter is between $7.8 billion and $7.9 billion, versus Street consensus of $8.8 billion. "Moving into second quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining," said CFO Lora Ho in a statement seen by CNBC.
Ahead of trading opening on the NASDAQ, Apple shares fell below $175, their lowest value since Apr. 13, when shares closed at $174.73.
TSMC specifically blamed its forecast on "softening" demand for high-end smartphones, as well as conservative estimates for cryptocurrency demand. A Morgan Stanley analyst, Charlie Chan, argued that some key factors were unconfirmed order cuts for the A11 Bionic processor in the iPhone X, and "around a month's delay of Apple's new 7 nm processor to July."
Apple is a major TSMC client, especially since the former has generally abandoned Samsung as a source of A-series chips. Any change in iPhone orders can deal a blow to TSMC's finances.
Conflicting reports have emerged about whether or not Apple has encountered lower demand for the iPhone X than expected. While assembly partner Foxconn posted strong December-quarter results, and Cowen and Company has said that production figures are in line, other reports have claimed order cuts and/or that the public has had trouble swallowing the phone's $999 price.
Speculation has pointed to Apple making this fall's follow-up to the X slightly cheaper, perhaps $899. KGI analyst Ming-Chi Kuo has suggested that a new 6.1-inch LCD iPhone -- shipping alongside 5.8-inch and 6.5-inch OLED models -- could start at just $550.
The iPhone X and its core, the TSMC-produced A11 Bionic chip.
TSMC's guidance for the quarter is between $7.8 billion and $7.9 billion, versus Street consensus of $8.8 billion. "Moving into second quarter 2018, continued weak demand from our mobile sector will negatively impact our business despite strength in cryptocurrency mining," said CFO Lora Ho in a statement seen by CNBC.
Ahead of trading opening on the NASDAQ, Apple shares fell below $175, their lowest value since Apr. 13, when shares closed at $174.73.
TSMC specifically blamed its forecast on "softening" demand for high-end smartphones, as well as conservative estimates for cryptocurrency demand. A Morgan Stanley analyst, Charlie Chan, argued that some key factors were unconfirmed order cuts for the A11 Bionic processor in the iPhone X, and "around a month's delay of Apple's new 7 nm processor to July."
Apple is a major TSMC client, especially since the former has generally abandoned Samsung as a source of A-series chips. Any change in iPhone orders can deal a blow to TSMC's finances.
Conflicting reports have emerged about whether or not Apple has encountered lower demand for the iPhone X than expected. While assembly partner Foxconn posted strong December-quarter results, and Cowen and Company has said that production figures are in line, other reports have claimed order cuts and/or that the public has had trouble swallowing the phone's $999 price.
Speculation has pointed to Apple making this fall's follow-up to the X slightly cheaper, perhaps $899. KGI analyst Ming-Chi Kuo has suggested that a new 6.1-inch LCD iPhone -- shipping alongside 5.8-inch and 6.5-inch OLED models -- could start at just $550.
Comments
https://appleinsider.com/articles/17/12/13/apple-samsung-could-be-only-smartphone-makers-with-7nm-chips-in-2018
In that thread I mentioned this:
"Samsung, Globalfoundries and Intel are all trying to woo HiSilicon to be that second supplier. Rumours say Samsung is throwing OLED and other IP into the offer to sweeten the deal. The Kirin 980 is apparently very near finished"
Huawei (HiSilicon) would appear to be almost officially in the 7nm group now according to this piece:
http://playfuldroid.com/huawei-mate-20-fueled-by-kirin-980-scores-350000-on-antutu/
HiSilicon was looking to increase capacity and after releasing its 2017 numbers, unit sales showed a very healthy YoY increase.
So I doubt there has been any downward change at TSMC from HiSilicon orders unless someone has poached all their business (Samsung was trying hard, it seems).
Nothing to see here. Move along.
One can only dream...
https://www.youtube.com/watch?v=3BuC_Gel1KI
If it's due to the iPhone 8 being more popular than the iPhone X, then that's unambiguously bad for TSMC's revenue, but it's harder to interpret what that means for Apple.
CQ2 iPhone units could see some downside
Overnight, TSMC guided down CQ2, pointing to weakness in high-end smartphones. We are already modeling below-consensus units for Q2, at 40mn units vs. the Street at 42- 43mn units for the June quarter, which we had lowered after our Asia trip last month. Given TSM’s guidance, we could see some additional downside to iPhone units of up to 5mn units for Q2, based on channel inventory dynamics.
Shipments likely higher than builds
Although CQ2 builds are ticking down, the sell-in is likely to be higher. Q2 normally faces the challenge of late-in-cycle iPhones released in the prior year when the upcoming launches in September start to detract from sales. The weaker traction of the iPhone X in CQ1 likely was further magnified in CQ2, causing further order cuts.
Potential impact to estimates
A 5mn shortfall in iPhones would likely lead to incremental pressure of ~$3.5bn in revenue (we are already at $50.4bn for the June Q, vs. the Street at $52bn), and EPS could see incremental pressure of $0.20 (We are at $2.06 vs. the Street at $2.15). Buybacks could be a small potential offset for 2Q (based on the magnitude completed in 1Q).
iPhone weakness understood, magnitude could be higher
In our opinion, investors are already expecting a weaker CQ2, but the magnitude could be surprising to some. We expect the shares to face some pressure heading into earnings, however, we view the long-term story as increasingly decoupled from iPhone cycles, morphing to one of capital return, services upside and stable hardware. We reiterate our Buy rating.
https://www.gizmochina.com/2018/04/07/huawei-kirin-980-mass-production-begins-this-quarter-to-use-tsmcs-7nm-process/
It looks like Huawei's plans haven't changed so I doubt any possible drop in revenues at TSMC is due to HiSilicon orders.
TSMC is also manufacturing Kirin 970s which will almost definitely see an increase in production over the next couple of months due to more new phones carrying it.
Insofar as smartphone SoCs, I suppose that leaves Apple and Samsung as the only candidates for the drop in revenues if the 980 rumour is true.