TSMC's Growth Just Became a Lot More Expensive

(Bloomberg Gadfly) -- Just three months ago, Taiwan Semiconductor Manufacturing Co. was confident it could boost revenue this year without upping its massive capital spending.

Not any more. CFO Lora Ho surprised investors Thursday by announcing an extra $1 billion outlay for 2018. Co-CEO C.C. Wei followed up by cutting the company's revenue growth outlook by as much as five percentage points, blaming weakness in smartphones and cryptocurrency mining.

So we move from 15 percent revenue growth on unchanged spending, to a 10 percent increase on 10 percent capex expansion. Ho tried to allay concerns when she told investors that gains will be made "through engineering efforts and innovation."

TSMC's Growth Just Became a Lot More Expensive

It doesn't help that second-quarter revenue guidance was $1 billion (about 11 percent) less than estimates, and that gross margin may fall short by as much as 3.5 percentage points.

TSMC is a master of managing investor expectations, but this time, numbers may speak louder than words.

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

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

To contact the author of this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

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