Smartphone slowdown tests new leadership at Taiwan’s chip champion

07-Sep-2018 Intellasia | Reuters | 6:00 AM Print This Post

In late August, the new chair of chip-making titan Taiwan Semiconductor Manufacturing Co (2330.TW), Mark Liu, got the sort of news that would make any boss smile: his biggest competitor was throwing in the towel.

Just under three months into Liu’s tenure, rival GlobalFoundries had announced that it would not compete in the latest generation of chip-making technology. It was a reminder of just how dominant TSMC has become in manufacturing chips for other companies, a business it all but invented.

TSMC stock quickly hit an all-time high. But Liu’s job seems likely to get tougher, not easier.

In an interview at the company’s newly christened Morris Chang headquarters building, named after its founder, Liu said global politics were his biggest worry.

“The worst you can imagine can be very bad,” Liu said, referring to geopolitical developments such as the US-China trade war and tensions between Taiwan and the mainland.

The thoughtful, soft-spoken engineer took over from the ebullient and outspoken Chang at a tricky time.

Emerging competition from China casts an ominous shadow, and the intricate network of relationships that have enabled TSMC and its brethren in the global technology supply chain to thrive are under threat amid the trade dispute.

Worse, global smartphone sales have flattened. Purchases of smartphone chips by the likes of Apple Inc (AAPL.O) and Qualcomm (QCOM.O) have powered TSMC for a decade.

But Liu remains optimistic about that business.

“Smartphone units have plateaued, but the silicon content of each smartphone on average is still increasing,” he said, projecting growth in the high single digits over the next couple of years. He said smartphones would continue to account for 40 percent to 50 percent of TSMC’s revenue.

A slowing smartphone market was one of the reasons the company cut revenue targets this year. It also reduced capital spending for the year from $11.5 billion-$12 billion to $10 billion-$10.5 billiona move it attributed at the time partly to more efficient equipment delivery and currency adjustments, but which Liu acknowledged was also influenced by softer demand.


Category: Taiwan

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