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TSMC: US export ban could disrupt business short-term

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Global M&A by the Numbers Q4 2023

TSMC: US export ban could disrupt business short-term

Chip manufacturer Taiwan Semiconductor Manufacturing Co. Ltd. said it is prepared to deal with tougher U.S. export restrictions to key customer China, and that any impact is likely to be short-term.

The U.S. and China signed an interim "phase one" trade agreement Jan. 15 but most export taxes remain, and according to reports, further tightening is possible. This could include banning shipments to Chinese company Huawei Technologies Co. Ltd. that contain more than 10% of U.S. components, according to Reuters — the current threshold is 25%.

TSMC said it is well equipped to deal with any rule changes as it has a sophisticated export control system which automatically calculates the proportion of U.S. tech in its components. Still, it is difficult to say how much of TSMC's products could be impacted by a stricter threshold.

"Every product is different in terms of their content, so it's really difficult to describe to you, generally, what is the content percentage," Mark Liu, chairman of the board at TSMC, said during an earnings call Jan. 16.

"All the technology, intellectual property and know-how are developed in Taiwan," Liu said.

The Taiwan-based company, which specializes in integrated circuit chips, said revenue from China increased in the past two years, with lower revenue growth from the U.S.

China revenue accounted for around 22% of its total sales in the fourth quarter of 2019, compared to 13% in the same quarter of 2018. Revenue from China for full-year 2019 accounted for 20% of the total. The company said this proportion is expected to stay the same.

"5G related smartphone sales and 5G networks in the high-performance computing area will both be the driver of revenue growth from China," CEO C.C. Wei said.

TSMC reported around NT$1.070 trillion in total revenue of 2019, up 3.7% year over year from NT$1.031 trillion in 2018.

Revenue from smartphones accounted for 49% of the total in 2019, compared to 45% in 2018. High-performance computing products accounted for 30% in 2019, compared to 33% in 2018. Internet of things contributed 8% of the total in 2019, and 6% of the total in 2018.

Net income attributable to shareholders of the parent company was NT$345.26 billion in 2019, or NT$13.32 per share, 1.7% down from last year's NT$351.13 billion, or NT$13.54 per share. The S&P Global Market Intelligence earnings per share consensus for 2019 was NT$13.18 on a GAAP basis.

The company expects to earn between US$10.2 billion and US$10.3 billion in total revenue in the first quarter of 2020, assuming an exchange rate of US$1 to NT$29.9, according to the company's presentation.

As of Jan. 15, US$1 was equivalent to NT$29.95.