Taiwan Semiconductor Manufacturing Co., the world's largest contract maker of chips, forecast record quarterly sales and raised its spending plan amid rising smartphone demand. The stock surged the most since May 2009.
Second-quarter revenue will be NT$154 billion ($5.2 billion) to NT$156 billion, the Hsinchu, Taiwan-based company said yesterday. That's at least 9 percent higher than the NT$141.2 billion average of 21 analyst estimates compiled by Bloomberg. The company's shares rose 6.6 percent to NT$106.50 at the close in Taipei, accounting for 44 percent of the Taiex
Index's 1.8 percent gain.
TSMC posted first-quarter profit that beat estimates as Samsung Electronics Co. and HTC Corp. join Sony Corp. and ZTE Corp. in releasing new smartphones, driving orders for mobile chips. Chairman Morris Chang, whose company gets $7 for every smartphone sold worldwide, raised his capital expenditure plan by as much as 10 percent as TSMC seeks to buy more equipment to meet demand for newer manufacturing technology.
“The company has already entered a new growth period,” Chang, 81, who is also Chief Executive Officer, told investors yesterday. “We attribute our strength to first, mobile-related applications whose demand remains strong, and TSMC's strong position in 28 nanometer technology.”
Eoin Treacy's view The market for desktop PCs continues to contract. However, the evolution of the mobile technology sector and the advent of imbedded programming are more than offsetting the decline of the pc sector and companies leveraged to this new sales avenue are benefitting accordingly.
Taiwan's various electronics sectors represent almost 50% of the market's total capitalisation. As a result, global perceptions of the technology's sector growth potential exert a strong influence on this market. The TAIEX Index has rallied back to test the 8000 level and a sustained move above it would confirm a return to medium-term demand dominance.
TSMC has been in a consistent medium-term uptrend since 2009 and a sustained move below the 200-day MA, currently near TWD95, would be required to question medium-term scope for continued upside.
Mediatek has been forming a first step above its 18-month base since early March and firmed this week to test the upper side of its range. A sustained move below the 200-day MA would be required to question medium-term recovery potential.
Elsewhere in the consumer electronics sector, Asustek Computer (P/E 10.28, DY 5.78%) produces motherboards and notebook computers. The share found support this week in the region of the 200-day MA, following a steep pullback. A sustained move below the low near TWD300 would be required to question potential for a further rebound.
HTC collapsed from a 2011 peak following Apple's successful litigation. The share found support near TWD200 from November and base formation appears to be underway. While the 14% yield is unlikely to be sustained, it would still be competitive if the dividend is halved.