TSMC Jumps as Investors Focus on Glossier Smartphone Outlook

(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. climbed the most in almost three years as investors focused on its prediction that the outlook for high-priced devices would be strong in the second half.

Shares in the world’s largest contract chipmaker rose 5.8 percent to NT$237.50 in Taipei. Executives said they expected demand for premium devices -- such as Apple Inc.’s iPhone -- to help offset crypto-sector lassitude in the second half. Nomura upgraded the company to a buy from neutral after its results, citing an improved 2019 picture as TSMC continues to move up the technology ladder.

“After experiencing a weak smartphone market in 1H18, TSMC is now seeing recovering demand in this segment,” George Chang and Angela Huang, analysts with Yuanta Investment Consulting, wrote in a report. “But management also says the pace of recovery, especially for low-end phones will be slow. One good thing for smartphones is that growing 5G demand will likely fuel the next wave of smartphones, leading to content upgrades and unit increases.”

Investors looked past a reduced revenue outlook for Taiwan’s largest company. A bellwether for the chip industry as well as an early indicator of iPhone demand, it heads into its busiest quarters grappling with waning enthusiasm for the high-powered chips used to mine digital currencies.

Chief Executive Officer C. C. Wei had said TSMC’s sales will rise this year by a high single-digit percentage in U.S. dollar terms, down from an already reduced projection of 10 percent. That followed a sales forecast of $8.45 billion to $8.55 billion for the three months ending September, short of the $8.68 billion analysts had projected.

TSMC also reduced its capital spending outlay for the year, to $10 billion to $10.5 billion from as much as $12 billion previously, signaling a slower pace of investment in technology and capacity expansion.

Apple, TSMC’s biggest customer, typically unveils its latest phones in September.

On Thursday, TSMC reported that net income rose 9.1 percent to NT$72.3 billion ($2.4 billion) in the second quarter, in line with estimates.

“Recently the development in smartphone units actually recovered,” Wei told investors, referring to global demand for mobile devices. “So it’s better than we forecast three months ago, but it’s not a big variation from what we forecast.”

©2018 Bloomberg L.P.