Weak Demand for Mining Hardware Impacts TSMC's Growth Outlook

During a recent Q3 earnings call, the world’s largest producer of semiconductors, Taiwan Semiconductor Manufacturing Company (TSMC), forecasted weakening growth for the rest of 2018 due to declining demand for cryptocurrency mining hardware. This outlook comes despite anticipating a significant increase in demand for its 7-nanometer processing chips from the high-end smartphone industry.

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TSMC Anticipates Weakened Fourth Quarter Growth

Lora Ho, the chief financial officer and senior vice president of finance for TMSC, predicts that declining demand for cryptocurrency mining hardware will offset much of the growth expected to be generated through sales of its 7-nanometer chips.

Ho stated: “Moving into fourth quarter, despite the current market uncertainties, our business will benefit from the continuous steep ramp of 7-nanometer for several high-end smartphones as well as the demand for 16/12-nanometer for the launches of new-generation GPU and AI. However, this growth will be partially offset by continued weakness in cryptocurrency mining demand and inventory management by our customers.”

C.C. Wei, TSMC’s chief executive officer and vice chairman, reiterated Ho’s predictions, stating: “Our second half of 2018 business will be strongly supported by the 7-nanometer ramp-up, which is mainly driven by a few new smartphone launches. However, our business is also negatively impacted by further weakening of cryptocurrency mining demand.”

TSMC Reduces Annual Growth Forecast

Taking all factors into account, Wei estimates TSMC’s 2018 growth will be approximately 6.5 percent, falling slightly short of the company’s prediction of between seven percent and nine percent total growth for 2018, as delivered during the company’s previous earnings call.

Ho predicts that TSCM’sl fourth-quarter revenue should reach between $9.35 billion and $9.45 billion – a 10.7 percent sequential increase in the company’s revenue.

Ho also predicts TSMC to post a fourth-quarter gross margin of between 47 percent and 49 percent, and an operating margin of between 36 percent and 38 percent.

Do you think that demand for mining hardware will increase again? Share your thoughts in the comments section below!

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