Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, has warned of falling revenue and deteriorating margins due to a combination of factors, including the ongoing U.S.-China trade tensions and the COVID-19 pandemic.
In a statement released on January 11, 2021, TSMC said that its fourth-quarter revenue is expected to be between $10.2 billion and $10.3 billion, down from its previous guidance of $10.5 billion to $10.6 billion. The company also warned that its gross margin, a key measure of profitability, is expected to fall to between 39% and 41%, down from its previous guidance of 42% to 44%.
The company attributed the decline in revenue and margins to several factors, including weaker-than-expected demand for smartphones and other consumer electronics, as well as a slowdown in the global economy due to the COVID-19 pandemic. Additionally, TSMC cited the ongoing trade tensions between the U.S. and China as a significant contributor to the decline.
Impact of TSMC’s falling revenue
In recent years, TSMC has been a major supplier of chips to several major tech companies, including Apple, Qualcomm, and Nvidia, among others. As such, the company’s warning of falling revenue and deteriorating margins is likely to have a significant impact on the global tech industry.
TSMC’s warning of falling revenue and margins is a clear indication of the challenges facing the global tech industry at the moment. The ongoing U.S.-China trade tensions and the economic fallout from the COVID-19 pandemic have created a difficult environment for companies like TSMC that rely on global demand for their products.
The decline in demand for smartphones and other consumer electronics has been particularly hard-hitting for TSMC, which has been a major supplier of chips to companies like Apple, Qualcomm, and Nvidia. The company’s warning of falling revenue and margins is likely to have a ripple effect throughout the tech industry, as other companies that rely on TSMC’s chips may also see a decline in their revenue and margins.
Despite the challenges facing the industry, TSMC is optimistic about the future. The company expects to see a rebound in demand in the first quarter of 2021, driven by the launch of new products and the continued roll-out of 5G networks around the world.
The 5G market is expected to be a major driver of growth in the tech industry over the next few years, and TSMC is well-positioned to take advantage of this trend. The company has invested heavily in 5G technology and has been working closely with leading companies in the space to develop new products and services.