A customer holds an Apple Inc. iPhone X smartphone during the sales launch at a store in New York.(Photographer: Michael Nagle/Bloomberg)

Apple, Chipmakers Drop on Taiwan Semi's Tepid Sales Forecast

(Bloomberg) -- Apple Inc. and a slew of chipmakers fell Thursday after Taiwan Semiconductor Manufacturing Co., the leading chip manufacturer for the smartphone industry, issued a growth forecast that rekindled concerns that the handset boom is waning.

Taiwan Semiconductor on Thursday predicted that sales for the current quarter will be a billion dollars less than analysts had projected. That followed a report by the International Monetary Fund earlier this week saying smartphone shipments declined for the first time, a reminder that the best days may be in the past.

Apple shares slipped 2.7 percent as of 2:55 p.m. in New York., while U.S.-traded shares of Hsinchu, Taiwan-based TSMC fell 6.4 percent.

TSMC is the world’s foremost manufacturer of chips designed by other companies, and its earnings are a key indicator of demand in a world where chipmakers and electronics manufacturers increasingly outsource costly production. The company produces the main semiconductor components of the iPhone and many of the world’s other best-selling smartphones.

Other chip and chip-equipment stocks fell on the news. Applied Materials Inc., which sells TSMC production machinery, fell as much as 7.2 percent. Broadcom Inc., another TSMC customer and a major supplier of phone parts, fell as much as 3.6 percent.

While TSMC is getting more growth from new customers, such as those seeking powerful chips to mine digital currencies, it’s confronting a slowdown in demand from smartphone vendors as developed markets get saturated and replacement cycles lengthen. JPMorgan Chase & Co. analyst Gokul Hariharan said the iPhone drove a lot of the weakness in Taiwan Semi’s forecast. He estimated that, quarter on quarter, the company’s Apple-related revenues may plunge roughly 50 percent in the second quarter after a 30 percent drop in the first period.

Apple, which accounts for more than 20 percent of TSMC’s revenue, may be struggling to attract new customers. Its forecast of $60 billion to $62 billion in March quarter revenue came in below estimates, indicating the iPhone maker may have sold fewer handsets than analysts were expecting. The company reports results May 1.

Meanwhile, in a note Thursday, Mizuho analyst Abhey Lamba said Apple’s third-quarter revenue forecast may miss at the midpoint. Apple will forecast revenue for the June quarter of $50.5 billion to $52.5 billion, according to Mizuho. Analysts’ are projecting $52.1 billion on average, according to data compiled by Bloomberg.

European chip stocks also weakened Thursday, with AMS sliding 5.3 percent, Dialog Semiconductor PLC declining 4 percent and STMicroelectronics NV dropping 3.3 percent. Netherlands-based semiconductor equipment maker ASM International reported first-quarter revenue results that were at the low end of management’s forecast. The stock fell 2.2 percent.

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