Thought 2018 Was Ugly for Tech? It’s Only Getting Worse

(Bloomberg Opinion) -- That pain the global tech industry felt at the end of 2018 isn't about to abate.

The outlook from Taiwan Semiconductor Manufacturing Co. Thursday in Taipei paints a dire picture that will persist at least through the middle of this year.

Those dark clouds I warned about in August haven't gotten any lighter. At the time, I noted that inventories in the hardware supply chain had climbed to pre-crisis levels. 

Data from TSMC show stockpiles only continued to grow. By value, inventory at the end the fourth quarter jumped 40 percent from a year earlier, while days outstanding rose 29 percent – that's in an environment where revenue itself increased just 4.4 percent.

Thought 2018 Was Ugly for Tech? It’s Only Getting Worse

In October, when TSMC reported third-quarter numbers, CEO C.C. Wei played down inventory concerns, forecasting a return to normalcy by the end of the fourth quarter.

He misjudged it. On Thursday he blamed a drop in demand for the failure to hit the mark. Weakness in high-end smartphones (read: Apple Inc.'s iPhone), was the reason, he said. 

Now TSMC starts 2019 with near-record inventory while forecasting almost no revenue growth for the year.

It goes beyond TSMC, with the company predicting the global chip industry will expand just 1 percent this year. Besides Apple, TSMC's clients include pretty much every hardware and chipmaker in the world – so if TSMC hurts, everyone hurts.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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