TSMC reports $3.9B Q1 profit, but slashes outlook for the year

Taiwan Semiconductor Manufacturing Company (TSMC) beat analyst estimates after reporting its net profit almost doubled in the quarter that ended in March, and said it was hopeful to sustain momentum in the current quarter but slashed its industry and foundry outlook for the year.

The Taiwan-headquartered company, which counts Apple among its clients, reported profit of NT$116.99 billion ($3.9 billion) on $10.31 billion revenue in the quarter that ended on March 31, higher than NT$105.8 billion profit that analysts had estimated (per Refinitive), and up 90.8% from the same period last year.

The Q1 profit is also 0.8% higher than Q4 2019, but the revenue dropped by a 2.1% during the period. The world’s largest contract chipmaker said its net profit margin in the quarter was 37.7% and operating margin 41.4%.

Many analysts were keenly watching TSMC’s earnings today to evaluate how the coronavirus crisis is impacting product demand. Apple, which will report its quarterly earnings later this month, said earlier this year that it did not expect to meet its revenue guidance in Q1.

A closer look at TSMC’s earnings today shows that the revenue it clocked from smartphones dropped by 9%. Research firm IDC estimates that smartphone shipment will declined 2.3% to 1.3 billion units this year. TSMC makes chips for a range of other equipments including laptops and home devices.

Another concern looming on TSMC’s performance is tied to Huawei, which based on estimates, accounts for nearly 10% of Taiwan’s company’s revenue. The U.S. could impose restrictions on TSMC and others that would prevent them from selling to the Chinese company.

Wendell Huang, VP and Chief Financial Officer of TSMC, did not address these concerns, but said the company expects revenue in Q2 to be “flattish ” — which is still impressive as several analysts have substantially slashed their Q2 estimates.

On a conference call with reporters, the company’s executives, however, pared back their growth outlook for the year citing weakening demand due to the coronavirus pandemic, and also slashed their industry and foundry outlook.