|Bid||333.00 x 0|
|Ask||333.50 x 0|
|Day's Range||333.00 - 335.50|
|52 Week Range||220.00 - 346.00|
|Beta (5Y Monthly)||0.62|
|PE Ratio (TTM)||25.01|
|Earnings Date||Apr. 16, 2020|
|Forward Dividend & Yield||15.00 (4.50%)|
|Ex-Dividend Date||Mar. 19, 2020|
|1y Target Est||262.88|
(Bloomberg Opinion) -- Intel Inc. closed out 2019 learning the hard lesson that making cutting-edge semiconductors is truly difficult.Like a prizefighter who refuses to admit he just hit the mat, the world’s biggest chipmaker is coming out swinging. And it should, because how it gets through 2020 could decide the company’s fate. Once the most advanced supplier of semiconductors, Intel struggled last year to ramp up production of chips that use its latest 14-nanometer process node, “letting customers down,” as CEO Bob Swan said in October. Its full-year results released Thursday showed that revenue climbed 2% and that net income was flat — hiding the fact that Intel dodged a bullet when it wasn’t able to supply enough of its most advanced products when clients needed them most.It tried to offer some reassurance three months ago by noting that it would increase 14-nanometer capacity 25% this year while raising capital spending to nose-bleed levels. To help overcome that slip-up, executives are keen to tell investors how many customers have signed up for its latest offerings, including a chip dubbed Ice Lake and an upgrade to its Comet Lake mobile processor, which use the next-generation 10-nanometer process. In reality, Intel is badly lagging behind both contract manufacturer Taiwan Semiconductor Manufacturing Co. and South Korea’s Samsung Electronics Co. TSMC, for example, started selling its 10-nanometer chip technology in mid-2017 and last year boosted revenue from its more advanced 7-nanometer offerings by more than 200%. When Intel eventually hits 7 nanometers in 2021, it will be almost three years behind.Intel’s rebuttal is that so-called process-node technology isn’t the only thing. It’s right, and clients should look at total system performance to see how all the parts — the processor, memory and controllers — all slot together. No other company in the world can offer the breadth and depth that Intel can.But with Advanced Micro Devices Inc. back in the game after a decade in the wilderness and a raft of chip designers ready to tap TSMC’s technology advantage, Intel would be foolish to rest on the belief that it can stay ahead of the game while lagging behind on technology. It knows this and has committed to speeding up its migration from the pace of a new node every five to seven quarters to as little as four quarters. Yet investors ought to also note that the introduction of a new node compresses margins during the early stages before better yields provide economies of scale later. A quicker timetable won’t allow as much time to enjoy the upside before the next margin crunch comes.Intel’s strategy to offset this squeeze is to tap continued growth in the data-center market. Cloud providers like Amazon.com Inc., Alphabet Inc.’s Google and Alibaba Group Holding Ltd. are among customers for its 14-nanometer Cascade Lake products, while the global 5G rollout is expected to provide a couple of solid growth years. Its Data Center Group accounts for 32.6% of revenue but 46.4% of operating income, making it Intel’s most lucrative business unit by operating margin.But that business relies on Intel’s ability to churn out leading-edge chips that, even if not equivalent to what TSMC can offer clients, won’t be too far behind. A data center operator might be willing to forgive a single-generation lag, reasoning that the broader platform integration Intel offers can provide the cost-benefit metrics it needs. A two-generation delay is hard to overlook, though. Intel’s size and strength means it won’t be easily knocked out. But it needs to get through this year unscathed if it’s to remain the undisputed heavyweight champ.(Updates with details about Intel’s 10-nanometer offerings in the fourth paragraph.)To contact the author of this story: Tim Culpan at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- ASML Holding NV’s top executive brushed off concerns about tensions between the U.S. and China, a market that’s growing in importance to the Dutch chip gear-maker.“Someone needs to make those chips and to make those chips you would need EUV, and there is basically only one place where they can get it,” Chief Executive Officer Peter Wennink said in an interview with Bloomberg Radio, referring to its advanced lithography equipment. “For our total business it doesn’t really matter.“ASML, which has a monopoly on advanced lithography equipment needed to make next-generation chips, is already a crucial supplier to Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. but hopes to drive deeper into China. Beijing wants to build a world-class homegrown chip industry to wean itself off foreign imports -- an effort that would need ASML’s one-of-a-kind machines. Yet it’s faced difficulty getting the Dutch government to renew a license to export to China amid ongoing trade tensions.ASML shares rose 0.2% at 1:14 p.m. in Amsterdam trading.“It’s up to the Dutch government to determine whether there is a national security risk and of course there are views in the U.S. and China whether that’s a risk,” Wennink said, adding that the company has responded to requests for information from the Dutch government.Asked whether he was optimistic about obtaining the license, Wennink said “the Dutch government takes very due care when it concerns the facts and the circumstances.”Read more: China Stockpiles U.S. Chips as ‘Silicon Curtain’ DescendsChina relies on imported chip manufacturing equipment for its audacious ambition of creating a self-reliant semiconductor industry, which supplies key components for a wide spectrum of electronics from smartphones to satellites. ASML is an essential link in that plan, which will drive Chinese purchases of more than $30 billion of semiconductor equipment between 2020 and 2021, according to industry organization SEMI. China’s Ministry of Foreign Affairs said in a statement last week the Netherlands should make an objective decision on ASML’s exports based on its own interests.U.S. PressureEuropean businesses have been caught in the middle of trade tensions between the U.S. and China, even as Washington and Beijing last week sealed the first phase of a trade deal. But the U.S. still maintains tariffs on roughly two-thirds of imports from China and both sides still need to negotiate the pact’s second phase, with discussions expected to be difficult.U.S. officials have urged allies to scrutinize business ties with Beijing, invoking concerns around national security and espionage. The White House, concerned about China’s ambitions to dominate a swath of technology from AI to semiconductors, has sought ways to contain the country’s rise. China, meanwhile, has threatened European countries with retaliation on trade if its companies are shunned.European telecom operators are among those squeezed between the two major world powers after Washington called on European governments to exclude Huawei Technologies Co.’s equipment from the build-out of their 5G networks.The Dutch government has held back on renewing the license ASML needs to export its extreme ultraviolet lithography machines under pressure from U.S. officials, Reuters reported this month. That equipment is key to any chipmaker that wants to fabricate next-generation chips, say of 7 nanometer or lower nodes.Last week, U.S. ambassador to the Netherlands Pete Hoekstra told Dutch newspaper Het Financieele Dagblad that ASML’s technology “doesn’t belong in certain places,” suggesting China. The Chinese ambassador, Xu Hong, had warned days earlier in the same paper that the relationship between the Netherlands and China was at risk if the government blocks EUV machine exports.For its part, the Netherlands says it will take its own decision on the matter, independent of foreign influence. “They are free to express their view and we take note of that, but it is not decisive,” Dutch Prime Minister Mark Rutte said of the U.S. and Chinese ambassadors’ comments last week.ASML’s EUV technology has both civilian and military applications and therefore is subject to EU dual-use licensing obligations under the Wassenaar Arrangement, according to the Dutch Foreign Ministry.EUV LicenseWennink said at a press conference the Dutch government had asked the company questions about the EUV technology, how it works, and who the customer is. The level of detail the government is seeking “is probably more than they would normally do,” he said.The delay in getting the EUV license has “zero” impact on the company’s business, he said. The licensing issue concerns their first-ever EUV order from a customer in China, where few companies are at the stage of ordering the cutting-edge technology. ASML mostly ships the machines, which cost roughly 150 million euros, to the U.S., Korea and Taiwan.The company forecast first-quarter sales largely in line with analyst expectations and said it won orders for nine more of its EUV lithography machines in the last quarter. The Dutch company said it expects sales of 3.1 billion euros ($3.4 billion) to 3.3 billion euros for the first quarter, compared with an average estimate of 3.26 billion euros.ASML also announced a share buy-back program of as much as 6 billion euros over three years, as it said it expects to win 4.5 billion euros in EUV revenue this year.(Updates with CEO comments from the 15th paragraph)\--With assistance from Joost Akkermans and Gao Yuan.To contact the reporters on this story: Ellen Proper in Amsterdam at email@example.com;Natalia Drozdiak in Brussels at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Amy ThomsonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Apple Inc. suppliers plan to begin assembling a new low-cost iPhone in February, people familiar with the plan said, as the company looks to address a wider swath of the global smartphone market ahead of its 5G handsets later this year.The Cupertino, California-based company is expected to officially unveil the new phone as early as March, one person familiar with its road map said. The assembly work for the new handset will be split among Hon Hai Precision Industry, Pegatron Corp. and Wistron Corp., the people added.This will be the first lower-cost iPhone model since the iPhone SE. It will look similar to the iPhone 8 from 2017 and include a 4.7-inch screen, Bloomberg News has previously reported. The iPhone 8 is still on the market, currently selling for $449, whereas Apple sold the iPhone SE for $399 when that handset launched in 2016.The new phone is expected to have Touch ID built into the home button, reusing established Apple technology instead of opting for an in-display fingerprint sensor like most modern Android rivals. It will not have Apple’s Face ID biometric authentication, but it will feature the same processor as Apple’s current flagship device, the iPhone 11.An Apple spokeswoman declined to comment.Apple Expects IPhone Shipments to Return to Growth in 2020Apple’s more affordable iPhones have proven popular with consumers, including the latest iPhone 11, whose starting price was $50 lower than Apple’s typical pricing. Strong demand for iPhones has prompted Apple to ask Taiwan Semiconductor Manufacturing Co. to make more chips in the current quarter, according to two people familiar with the matter.Shares in Japan Display Inc., which supplies LCD screens for Apple’s lower-tier iPhones, closed 1.35% higher on Wednesday.Apple is planning a slew of new high-end iPhones for release later in 2020 that include 5G connectivity, faster processors, and new 3-D cameras on the back, Bloomberg News has reported.A cheaper offering may help Apple better compete in the most price-competitive and fast-growing emerging phone markets, particularly India. iPhones are still a hard sell in the country, which is overrun by aggressively-priced Android rivals coming in at less than $200. Still, Apple has shown a will to carve out a niche for itself and is eyeing locations for Apple stores within its borders.The U.S. tech juggernaut is hoping its handset shipments will return to growth this year, having set itself the goal of shipping more than 200 million units in 2020. The successor to the iPhone SE will play a significant role in that task.(Updates with Japan Display share price move)To contact the reporters on this story: Debby Wu in Taipei at firstname.lastname@example.org;Mark Gurman in Los Angeles at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Vlad SavovFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Apple Inc. has asked chipmaking partner Taiwan Semiconductor Manufacturing Co. to increase its output of A-series processors this quarter in order to satisfy higher-than-anticipated iPhone demand, people familiar with the company’s plans said.The iPhone 11 and 11 Pro models were well received on their debut in the fall and their sales in China have been particularly strong, outselling 2018’s releases in a market that has otherwise been shrinking. Even without fifth-generation wireless networking, iPhone demand has been outperforming the market and Apple’s expectations, and the company asked assembly partners to increase their production of the latest generation.The most affordable iPhone 11 model, equipped with an LCD screen, was a particular driver for the increased demand, one person said.New Low-Cost IPhone Said to Enter Mass Production in FebruaryAlong with the popularity of existing models, Apple’s business with TSMC is also set for a boost from an imminent iPhone SE successor, a low-cost model that will begin mass production in February ahead of an official unveiling as soon as March, Bloomberg News reported. It will be built around the same processor as the iPhone 11 generation.TSMC spokeswoman Nina Kao said the company doesn’t comment on its business with any specific customer. An Apple spokeswoman declined to comment.The Taiwanese chipmaker recently reported earnings above most analysts’ expectations and it forecast another good quarter ahead. Though it faces potential headwinds from the threat of tightening U.S. sanctions on key customer Huawei Technologies Co., analysts believe additional demand from Apple and Advanced Micro Devices Inc. will replace any potential Huawei drop-off.\--With assistance from Mark Gurman.To contact the reporter on this story: Debby Wu in Taipei at email@example.comTo contact the editors responsible for this story: Edwin Chan at firstname.lastname@example.org, Vlad SavovFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Huawei Technologies Co. has become very much the U.S.’s whipping boy in the battle to nip China’s technological ascendancy in the bud. President Donald Trump’s administration has slapped sanctions and curbs on the Shenzhen-based company and lobbied allies to do the same. Last month growing resistance against Huawei among lawmakers in Germany’s governing coalition sparked threats of retaliation from the Chinese ambassador. But what’s happening next door in the Netherlands has higher stakes for China. There, Beijing’s envoy this week said there will be negative consequences if the Dutch continue to block the export of a single piece of high-tech manufacturing equipment made by ASML Holding NV. According to Reuters, the U.S. has exerted pressure to prevent the sale to a Chinese firm. But it’s not just any machine. It’s a $150 million state-of-the-art apparatus that could ensure Moore’s Law — which says that processing power doubles every 18 months — continues apace, and the microchips powering our smartphones, computers and networks get ever smaller.Like with Huawei, U.S. Secretary of State Mike Pompeo cited intelligence concerns, though Reuters didn’t specify what they are. The Hague subsequently rescinded an export license it had previously granted for the machine.Any individual nation state cutting Huawei, the world’s largest networking business, out of the supply chain for its 5G networks will of course be a blow to the Chinese firm. But the impact on China as a whole will be limited. Beijing will still be able to build its own next-generation telecommunication networks, and losing a few exports will have a minor effect on the economy as a whole. Huawei’s sales in Europe, the Middle East and Africa totaled $31 billion in 2018.A ban on buying machines from ASML is potentially far more significant, because it will hinder China’s ambitious goals to strengthen its super high-tech manufacturing industry.As far as tech giants go, ASML doesn’t have the global brand cachet of an Apple Inc., Samsung Electronics Co. or Amazon.com Inc. That’s partly because its products are two steps removed from the electronic devices that reside in consumers’ pockets, on their desktops or in their living rooms: ASML builds the machines that make the semiconductors that go into their devices. But it’s one of Europe’s biggest three technology companies, and its top customers include chipmakers Intel Corp., Samsung and Taiwan Semiconductor Manufacturing Co., which is known as TSMC and makes chips for Apple and Huawei alike.The Dutch firm stands out from rivals Nikon Corp. and Canon Inc. because it’s alone in having mastered an approach known as extreme ultraviolet lithography, which is needed for the manufacture of the next generation of chips. Lithography is the process by which circuit patterns are etched onto silicon wafers, and the EUV process will allow the printing of circuits that are more than 10 times smaller than the current standard.QuicktakeHow Chinese Technology Grew to Rival Silicon ValleySo you can see why China would be particularly interested in using ASML’s equipment. Although the country is a hub of electronics manufacturing, much of that is simply assembling iPhones, laptops, smart speakers and the like. The underlying tech is often imported, including some $200 billion-worth of semiconductors each year.Beijing wants to reduce that dependence on imports by investing $150 billion over a decade in an effort to take the lead in technology design and manufacturing. Access to machines made by ASML will be essential to achieving that. By the end of next year, as much as half of TSMC’s revenue will depend at least partly on some EUV processes, according to Bloomberg Intelligence analyst Masahiro Wakasugi. That could be $18 billion worth of chips. TSMC said on Thursday that its deployment of EUV machines was on schedule, advancing at a similar rate to earlier technologies, as it reported earnings that exceeded analyst expectations.While it could take a decade and more than one EUV machine for Chinese firms such as Semiconductor Manufacturing International Corp. to rival that, that is clearly the long-term goal. (SMIC is reportedly the company that placed the order at the heart of the current spat.)Dutch newspaper Het Financieele Dagblad reported last year that ASML was the target of theft by a rival with ties to the Chinese state, though the company later said that any “suggestion that we were somehow victim of a national conspiracy is wrong.” Chief Executive Officer Peter Wennink surely doesn’t want to lose China’s business: It’s ASML’s fastest-growing market.What makes the Dutch move so remarkable is that the U.S. can only unilaterally block sales abroad if components or R&D contributions originating domestically exceed 25% for the relevant product. Here, it seems to have succeeded in leaning on the Dutch government to prevent the sale even though, according to press reports, ASML’s extreme ultraviolet lithography machine doesn’t meet that test. An even greater risk would be that other important suppliers of underlying technology follow suit, whether under U.S. duress or not.(Adds TSMC comment on latest technology in fourth-to-last paragraph.)\--With assistance from Tim Culpan.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. projected quarterly revenue well above analysts’ estimates, brushing aside concerns that tighter U.S. sanctions on No. 2 customer Huawei Technologies Co. could dampen its business.Shares in the world’s largest contract chipmaker have slid two straight days on worries that Washington will tighten existing restrictions on exports to Huawei, potentially curtailing shipments from TSMC and other non-American firms. If the U.S. does move ahead, any disruption would be short-term because TSMC could replace some of the lost Huawei business with orders from other customers thanks to the 5G boom, Chairman Mark Liu said during a post-earnings conference with analysts.TSMC has recruited Intel’s former chief lobbyist to gauge the temperature in Washington and lessen any fallout from U.S.-Chinese tensions, including policies involving Huawei.“We are prepared to deal with this export control regulation,” Liu said, adding that if any new controls were introduced, TSMC would carefully “evaluate product by product eligibility of export.”But some analysts judged Liu’s assessment too rosy. TSMC may be over-estimating the ability of other customers to pick up the slack were its Huawei business to be curtailed, Bernstein analyst Mark Li said. “The forecast, according to TSMC, assumes ‘business as usual’. The company sees any disruption will be short-lived and for example commented that smaller telco infrastructure suppliers can quickly pick up the shortfall if Huawei can’t deploy 5G as planned. We find that too optimistic,” Li said.TSMC reported better-than-expected net income of NT$116 billion ($3.9 billion) in the December quarter. Gross margins came in at 50.2%, also exceeding estimates. It forecast revenue of $10.2 billion to $10.3 billion in the March quarter, surpassing estimates for $9.6 billion.Apple Inc.’s main chipmaker is banking that the rollout of fifth-generation enabled smartphones in 2020 will galvanize growth. Semiconductor orders from Huawei account for 10% of its revenue, according to Bloomberg data. TSMC’s robust results demonstrate how the world’s largest contract chipmaker is investing in technology to safeguard its market lead over Samsung Electronics Co. and Intel Corp. TSMC spent almost $15 billion on technology and capacity in 2019 and is prepared to shell out as much as $16 billion this year, anticipating the advent of fifth-generation smartphones. The company, a barometer for the tech industry thanks to its heft and place in the supply chain, has said the advent of 5G will result in more chips in devices than before.Capex growth this year will mainly come from an increase in specialty technology including CMOS sensors -- which turn light into digital signals for smartphone cameras -- and power management chips, and packaging technology, according to Chief Financial Officer Wendell Huang.TSMC previously reported record fourth-quarter revenue of NT$317.2 billion. Chief Executive Officer C. C. Wei has expressed hopes that the emergence of 5G, the foundation of future technologies from automated factories and smart homes to faster consumer electronics, will underpin its business in coming years.In addition to 5G, TSMC’s counting on growing demand for high-performance computing. Positive comments from Micron Technologies Inc. and Samsung suggest the global semiconductor market is poised for a gradual recovery on the back of demand related to 5G, artificial intelligence and automotive applications.(Updates with details on preparation for Huawei curbs)To contact the reporters on this story: Debby Wu in Taipei at email@example.com;Gao Yuan in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. The so-called phase-one U.S.-China trade pact has done little to allay fears about Huawei Technologies Co.’s prospects and those of its key suppliers, two analyst research reports suggest.Morgan Stanley and Credit Suisse warned of the likely trickle-down impact of U.S. sanctions on Huawei should they remain in place or be tightened even further. Restrictions could slow the pace of China’s fifth-generation networking rollout, which would affect Taiwan Semiconductor Manufacturing Co. and fellow technology and manufacturing providers, one report said.Tensions over tech are likely to remain as the Trump administration considers steps to further limit the ability of American companies to supply Huawei. This comes even as Treasury Secretary Steve Mnuchin said on Wednesday he doesn’t “view Huawei as a chess piece” in continuing negotiations with China.Tech Industry Shudders as U.S. Weighs New Limits on Huawei SalesMorgan Stanley analysts forecast Huawei’s total smartphone volume at 200 million this year, a decline of 40 million from 2019. Without regaining access to the Google Mobile Services suite on Android, Huawei’s “smartphone shipments would be close to zero in Western Europe,” said the analysts. That compares to shipments of 29 million units in 2018 and 21 million devices through the first three quarters of 2019 for the region, they added. The European market had served as a catalyst for Huawei’s consumer division, which was itself the biggest growth engine for the Chinese company.Closer controls on Huawei would also impact its key suppliers. Chipmaking giant TSMC, which counts Huawei as its second largest customer after Apple Inc., relies on its semiconductor orders for 10% of revenue, according to Bloomberg data. Credit Suisse wrote that TSMC would lose a chunk of that business in the event of increased sanctions, though the hit would be partially offset by other customers like Apple and Advanced Micro Devices Inc. expanding their orders. TSMC reports earnings later today, hoping to shake off a two-day decline in share price amid added uncertainty about U.S. pressure.Some Asian tech names stand to benefit under new supply chain scenarios, Samsung Electronics Co. most notable among them. It’s expected to soak up the Western Europe smartphone demand that would emerge without competitive Huawei devices on the market, Morgan Stanley said. Credit Suisse echoed the positive sentiment, adding that the Samsung LSI chipmaking division would “benefit supplying the mid-tier Qualcomm chips and Exynos family” in the absence of Huawei from key global markets.Read more: TSMC Hires Ex-Intel Lobbyist to Deal With U.S.-China Tensions\--With assistance from Cindy Wang.To contact the reporter on this story: Vlad Savov in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- With tech earnings looming this month, investor attention is zeroing in on some of Asia’s largest chipmakers. And there’s reason for it: the sector’s influence on the region’s stocks has kept on growing.Taiwan Semiconductor Manufacturing Co. is set to report fourth-quarter results Thursday, potentially hitting record revenue of more than $10.2 billion and its highest quarterly gross margins since 2018, Bloomberg Intelligence analyst Charles Shum said in a Jan. 7 preview. TSMC shares are up more than 4% this month and touched an intraday high Tuesday.“Many of TSMC’s customers such as Huawei, Qualcomm and Mediatek are quickening their pace of adopting cutting-edge processes to prepare for the launch of 5G mobile devices,” Shum said in the report.Rival Samsung Electronics Co. releases its final results Jan. 30. Preliminary figures announced earlier this month showed quarterly earnings beat estimates as global chip prices have shown signs of escaping a protracted slump.The two chipmaking behemoths are the No. 3 and 4 largest stocks in the MSCI Asia Pacific Index and also key contributors to the growing influence of technology names in the gauge. The industry now accounts for almost 15% of the regional gauge, up from 12% at the start of 2019. Internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. have the highest weightings in the index.Managers of emerging-market stocks have increased their exposure to semiconductor shares to a record 7.3%, making of it the largest overweight by sector, according to Steven Holden, an analyst at Smartkarma Holdings Pte. Taiwan and South Korean equity overweights also hit a peak, with TSMC among the most favorite companies, it said.Despite all the positives, one potential question mark for TSMC remains Huawei Technologies Co. Tighter export restrictions on the Chinese company by the U.S. would make some of TSMC’s technologies unshippable to Huawei, analysts led by Mark Li at Sanford C. Bernstein wrote in a Jan. 8 note. While the actual impact on revenue is expected to be in the low single digits and TSMC will be able to pivot to other customers, a short-term impact is “inevitable as share shifts and supply-chain realignment take time.”But overall, the outlook for the semiconductor industry is positive on growth drivers including new 5G technology adoption, internet of things momentum, robust data center demand and even new game console launches, Credit Suisse analysts Randy Abrams and Haas Liu said in a Jan. 13 report.“Stocks are recovering from the prior decade’s de-rating and returning to pre-crisis valuations that can sustain,” the analysts said. The main risk? With higher valuations after a strong 2019 rally, any disappointment from product cycle ramps or macro shocks could lead to potential short-term pullbacks, they added.Stock-Market SummaryMSCI Asia Pacific Index up 0.2%Japan's Topix index up 0.3%; Nikkei 225 up 0.7%Hong Kong's Hang Seng Index down 0.3%; Hang Seng China Enterprises down 0.4%; Shanghai Composite down 0.1%; CSI 300 down 0.2%Taiwan's Taiex index up 0.5%South Korea's Kospi index up 0.3%; Kospi 200 up 0.4%Australia's S&P/ASX 200 up 0.8%; New Zealand’s S&P/NZX 50 up 0.7%India's S&P BSE Sensex Index little changed; NSE Nifty 50 little changedSingapore's Straits Times Index up 0.5%; Malaysia’s KLCI down 0.7%; Philippine Stock Exchange Index down 0.5%; Jakarta Composite up 0.2%; Thailand's SET little changed; Vietnam's VN Index up 0.2%S&P 500 e-mini futures little changed after index closed up 0.7% in last session(Adds Smartkarma comments in sixth paragraph, stock-summary section)\--With assistance from Cormac Mullen, Abhishek Vishnoi and Moxy Ying.To contact the reporter on this story: Eric Lam in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Christopher Anstey at email@example.com, Lianting Tu, Cecile VannucciFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
(Bloomberg) -- Taiwan Semiconductor Manufacturing Co., a major chipmaker to Apple Inc. and Huawei Technologies Co., has recruited rival Intel Corp.’s former top lobbyist Peter Cleveland to spearhead an unprecedented effort in Washington to mitigate impact from U.S.-Chinese trade tensions.The world’s biggest contract chipmaker joins a growing number of companies with Chinese business interests that are stepping up U.S. lobbying, aiming to gauge and lessen the fallout from Washington’s ongoing dispute with Beijing. The Taiwanese company indicated in July it was considering starting government relations operations in the U.S.Cleveland, who headed Intel’s lobbying effort for over a decade, updated his LinkedIn profile this month to reflect new responsibilities including representing TSMC on policy, legislative and regulatory matters. There’s been speculation U.S. sanctions may affect TSMC’s shipments to Huawei. But the Taiwanese chipmaker has publicly quashed talk of U.S. pressure for it to stop supplying its No. 2 customer, which Washington blacklisted and views as a national security threat.Read more: TSMC to Keep Supplying Huawei, Quashes Talk of U.S. Pressure“Peter Cleveland is helping TSMC enhance communications with stakeholders including government officials at a global level,” TSMC spokeswoman Nina Kao told Bloomberg News by phone, adding Cleveland is based in Washington D.C.While there have been TSMC staffers tasked with similar responsibilities previously, Cleveland’s arrival coalesces the effort under one independent position, according to Kao. TSMC plays an indispensable role in the global semiconductor industry, commanding more than 50% of the global foundry market. U.S. and Chinese tech companies from Advanced Micro Devices Inc. to Nvidia Corp. rely on it for the production of their most advanced chips.It joins a wave of companies that in recent months have begun to play a more active role in lobbying Washington. Huawei spent a company-record $1.8 million on federal lobbying in the past quarter as it struggled against U.S. sanctions that deprived it of key components or software from American suppliers like Intel, Xilinx Inc. and Alphabet Inc.’s Google. TikTok, the popular music-video app owned by Beijing-based ByteDance Inc., is also expanding its U.S. lobbying operations.Huawei is TSMC’s largest customer after Apple, according to Bloomberg supply chain data, contributing roughly 10% of the chipmaker’s revenue. Cleveland managed 200 attorneys and policy professionals while at Intel, and his areas of expertise include antitrust reviews, 5G spectrum allocations, and global IP enforcement and protection, according to his LinkedIn profile. Before Intel, he served as California Senator Dianne Feinstein’s chief of staff.Read more: Trump’s Blacklisting of Huawei Is Failing to Halt Its Growth\--With assistance from Ian King and Vlad Savov.To contact the reporter on this story: Debby Wu in Taipei at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Ousted Bitmain Technologies Ltd. co-founder Micree Zhan Ketuan has initiated a legal case to try to regain his position, escalating a battle for control of the world’s biggest miner of cryptocurrency.Great Simplicity Investment Corporation, owned by the engineering whiz-turned-entrepreneur, filed a summons in December in which he asked a Cayman Islands court to reverse a shareholder decision that cost him voting control of the crypto-miner. In the summons -- a notice served to defendant Bitmain -- Zhan asked the court to invalidate a vote at a November extraordinary general meeting that curtailed his rights. Shareholders voted then to convert Bitmain’s Class B shares to one vote per share, versus 10 votes previously -- effectively slashing Zhan’s influence, according to the summons obtained by Bloomberg.It’s the latest salvo in a conflict that erupted into the public eye after Bitmain stripped Zhan of his titles in October. Billionaire Chief Executive Officer Wu Jihan is now back in the driver’s seat, hosting public events to tout new sales initiatives and attract clients. He had earlier warned employees against taking further instructions from Zhan or attending any meetings he convenes, threatening staff with dismissal or criminal charges.Zhan, for his part, wrote in a letter published November on his WeChat social media account that he’ll return to Bitmain and “restore order” as soon as possible, legally. “If someone wants war, we’ll give them war,” he posted on his feed. The co-founder held close to 4 million B shares according to a 2018 IPO prospectus, almost double that of Wu, the only other holder of the special stock. It’s unclear whether that balance has shifted since.Nishant Sharma, a Bitmain spokesman, declined to comment when contacted by Bloomberg. Calls and messages to Micree Zhan’s personal mobile went unanswered. A representative for Conyers Dill & Pearman, the attorneys for the plaintiff, didn’t comment when contacted.The internal squabble complicates the prospects of a company grappling with intensifying competition from smaller rivals such as U.S.-listed Canaan Inc. and MicroBT. Bitmain, valued at about $15 billion in a private funding round in 2018, revived plans for a U.S. listing last year after a failed attempt in less crypto-friendly Hong Kong in 2018, but that didn’t come to fruition either.The two co-founders had long served as co-CEOs but were replaced in March by Zhan’s pick, Wang Haichao, as the company struggled with layoffs and a cash crunch triggered by Bitcoin’s price plunge. Wang is still employed by the company.Bitmain’s market lead remains under attack. Canaan had a 22% market share of Bitcoin mining machines in terms of computing power sold in 2019’s first half, up from 15% for the same period the previous year, according Frost & Sullivan figures cited in Canaan’s IPO prospectus. While Bitmain and its major rivals produce machines with similar specifications and prices, they live and die competing against each other -- and smartphone makers -- for tight chip supplies from foundries operated by the likes of Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.To contact the reporters on this story: Zheping Huang in Hong Kong at firstname.lastname@example.org;Benjamin Robertson in london at email@example.comTo contact the editors responsible for this story: Edwin Chan at firstname.lastname@example.org, Joanna OssingerFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
(Bloomberg) -- Technology giants are increasingly designing their own semiconductors to optimize everything from artificial intelligence tasks to server performance and mobile battery life. Google has the Tensor Processing Unit, Apple Inc. has the A13 Bionic and Amazon.com Inc. has the Graviton2. What the titans all lack, however, is a factory to build the new chips they are dreaming up.Enter Samsung Electronics Co., which is planning a decade-long, $116 billion push for their business. The South Korean company is investing heavily in the next step in miniaturizing semiconductors, a process called extreme ultraviolet lithography (EUV). It’s by far the priciest manufacturing upgrade Samsung has ever attempted, a risky bid to move beyond its established business of cranking out commoditized silicon and to leapfrog the incumbent leaders in the $250 billion foundry and logic-chip industry.“A new market is opening up,” Yoon Jong Shik, executive vice president of Samsung’s foundry business, said at a forum recently held in Seoul. “Companies like Amazon, Google and Alibaba, which lack experience in silicon design, are seeking to make chips with their own concept ideas in order to boost their services. I think this would bring a significant breakthrough for our non-memory chip business.”Samsung is a relative underdog in this growing field. The foundry business -- as the manufacturing of chips for companies like Google and Qualcomm Inc. is known -- is dominated by Taiwan Semiconductor Manufacturing Co. with more than half the market, according to TrendForce Corp. data that puts Samsung at 18%.TSMC also took over Apple’s A-series processor manufacturing from Samsung, which was the original production partner. Samsung plans to spend about $10 billion per year on equipment, research and development over the next decade, but TSMC is even more ambitious with capital expenditure of around $14 billion for this year and next.“It is not just a matter of willingness,” said CW Chung, head of pan-Asia technology at Nomura Financial Investment Co., in assessing Samsung’s chances of success. “Chip-making is like a composite art. Unless there are enough supports for all-round social infrastructures, it’d be a scarcely achievable goal.”To win over clients, top Samsung executives are touring major cities from San Jose to Munich to Shanghai, hosting foundry forums and negotiating deals. ES Jung, president and general manager for the foundry business, is the frontman delivering Samsung’s “can-do” spiel at every gathering, where his practiced joke is to suggest that his initials stand for “engineering sample.”“The complexity of the lines drawn by the EUV equipment is similar to building a spaceship,” said Jung while unveiling a $17 billion EUV plant in Hwaseong earlier this year, flanked by Samsung heir and de-facto boss Jay Y. Lee and South Korean President Moon Jae-in. The fab is planned to start mass production in February 2020.A single EUV machine from ASML Holding NV costs $172 million and Samsung is setting up dozens of them in Hwaseong in an effort to be first with the technology. TSMC and Samsung are both expected to reach 5-nanometer production processes with EUV in the new year, which means they’ll have only each other to compete with in a market that’s only set to expand. And once they ramp up and achieve economies of scale, the overall process cycle time is likely to decrease by 20% and the foundry capacity output will increase by 25%, according to a Citigroup Inc. research report.“TSMC is too busy with orders pouring in for new products as we enter into the 5G era,” said Greg Roh, senior vice president at Hyundai Motor Securities. “For Samsung, that’s bringing a good chance to expand their market share by offering lower prices and delivery schedules to meet clients’ needs.”Samsung is collaborating with major clients on designing and manufacturing custom chips and that work is already starting to add to its revenue, according to one Samsung executive who has direct knowledge of the matter. The push toward bespoke processors in Silicon Valley and China is opening up fresh opportunities and Samsung already has established relationships, as demonstrated by its recent announcement that it’ll produce an AI chip for Baidu Inc. early next year.Officials at Samsung believe the company has a competitive edge from its experience building both the chips and the devices that they go into. It is thus able to foresee and address the engineering requirements of its clients. Samsung believes its other trump card is an ability to package memory and logic chips into a single module, improving power and space efficiency. Analysts do warn, however, that some companies are wary about outsourcing production to a direct competitor in the consumer electronics market -- lest Samsung learns and copies their chip designs in its own products.“Ultimately, the success of Samsung’s logic chip business depends on its market positioning,” Hsu said. “On the foundry side, Samsung needs to eliminate its clients’ suspicions of Samsung LSI being a potential competitor.”Samsung is reaching out to smartphone-making rivals and has already agreed to sell 5G Exynos chips to Vivo. At the same time, it’s going to be manufacturing Qualcomm’s 5G mobile chipset using the same EUV process. On yet another front, the company is competing with foundry customer Sony Corp. in the growing market for image sensors, having this year unveiled an unprecedented 108-megapixel camera for smartphones. “I think Samsung’s CMOS image sensor business will continue to do well, riding on the industry boom,” said Bloomberg Intelligence analyst Anthea Lai.If Samsung can move ahead technologically, it should find no shortage of customers for its varied semiconductor offerings. Though China is increasingly turning to domestic suppliers for all things tech, the greater efficiency of EUV chips may be key in helping Samsung solicit business from the world’s second-biggest economy.“The increased demand for in-house chips spells good news for the growth of the foundry industry,” TrendForce analyst Chris Hsu said.\--With assistance from Debby Wu.To contact the reporter on this story: Sohee Kim in Seoul at email@example.comTo contact the editors responsible for this story: Edwin Chan at firstname.lastname@example.org, Vlad Savov, Peter ElstromFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- A Chinese chip designer who helped Bitmain Technologies Ltd. become the world’s largest maker of Bitcoin mining rigs before starting his own company has been arrested, according to three people familiar with the matter.Yang Zuoxing, a tech mastermind with Bitmain until June 2016, was detained by police in Shenzhen at the end of October in relation to a legal dispute with his former employer, said the people, who asked not to be identified discussing legal matters.Prosecutors in the city’s Nanshan district said in a Dec. 12 statement that Yang was arrested recently on suspicion of embezzlement, and that legal procedures were ongoing. The statement omitted the second of three Chinese characters that make up Yang’s full name, possibly to shield his identity. It didn’t mention Bitmain or MicroBT, the crypto-mining company Yang founded a month after quitting Bitmain.MicroBT has grown into a serious contender, clawing market share away from Bitmain with its Whatsminer equipment. While crypto-miner makers produce machines with similar specs and prices, they compete against each other for tight chip supplies from foundries operated by Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.The arrest of Yang comes as competition between Bitmain and its rivals intensifies. While MicroBT’s flagship Whatsminer 20 series are the best-selling Bitcoin mining rigs so far this year, Yang’s absence has halted his company’s ability to make key decisions including on pricing, said two of the people.Representatives of MicroBT and Bitmain declined to comment. The prosecutors’ office in Nanshan didn’t respond immediately to a request for comment.Bitmain has waged several legal battles against prominent ex-staffers. In 2018 the Beijing-based company lost a court ruling against MicroBT over allegations that Yang’s startup infringed its patent rights. Earlier this year, Bitmain filed a lawsuit against three former employees who started rival mining pool Poolin for allegedly violating a non-compete agreement.An internal power struggle within Bitmain saw billionaire chief Wu Jihan kick co-founder Micree Zhan out of the company recently, and the company has been trying to tout new sales initiatives to lure new customers.Yang toldpreviously that he helped Bitmain design its highly sought-after machines, but he left the company after Wu and Zhan turned down his request for a stake in the business. Yang, the majority shareholder of MicroBT, graduated from Beijing’s prestigious Tsinghua University with a PhD in mechatronics before entering the chip-design industry.Read more: Ex-Bitmain Chip Designer Takes on Crypto’s Mining GoliathTo contact the reporter on this story: Zheping Huang in Hong Kong at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Colum Murphy, Vlad SavovFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- China has made developing its own chip industry a matter of patriotic pride. It helps that “China chip” and “China heart” sound the same in the local language. The strain of this 1.7 trillion yuan ($243 billion) endeavor may be too much for the debt-clogged arteries of its municipal governments, though.Over the past decade, Beijing hasn’t hesitated to deploy its fiscal might in pursuit of economic and social objectives. After the 2008 collapse of Lehman Brothers, the government spent 4 trillion yuan building roads and railways to bolster the economy, sending growth into overdrive. Between 2015 and 2018, authorities poured roughly 3.5 trillion yuan into shanty-town developments to aid the poor.Lately, fiscal spending has turned to loftier aspirations. With its national champions ZTE Corp. and Huawei Technologies Co. pinched by U.S. sanctions, China has become more determined to develop its own 5G, artificial-intelligence and chip technologies. More than 50 large-scale semiconductor projects have sprung up across the country, with a total of 1.7 trillion yuan of investment pledged, online media outlet Caixin estimates. Most of these multibillion-dollar projects will be state-financed. For instance, the government holds 74% of the equity in three-year-old Yangtze Memory Technologies Co. The company is managed by Tsinghua Unigroup Co., the business arm of prestigious Tsinghua University, President Xi Jinping’s alma mater. Yangtze Memory’s NAND memory technology shows potential, and is only half a generation behind the global flash memory leaders. Huawei subsidiary HiSilicon, meanwhile, is seen as a leading design house for smartphone applications.These promising examples are too few and far between, though. Elsewhere, it’s mostly too much effort for too little reward. China’s chip manufacturing technology is three to five years behind Taiwan Semiconductor Manufacturing Co., the world’s leading contract supplier, and the country is sub-scale in assembly and testing, industry experts say. Meanwhile, financial cracks are showing. A chip park in eastern China, with 4.5 billion yuan already spent, has ground to a halt after the impoverished municipal government failed to cough up more money, a Caixin investigation found. Another industrial park in the central city of Wuhan had its land usage rights frozen by a court because of financial difficulties. Wuhan has positioned itself as an inland technology hub in the mold of Phoenix, Arizona.As Korean and Taiwanese industry leaders know, chip manufacturing is a terribly expensive business. Samsung Electronics Co., for instance, splashed out about $25 billion annually in capital expenditure over the past five years. To catch up with TSMC’s leading-edge wafer capacity, a Chinese chip park needs to spend about $60 billion to $80 billion on equipment alone, Credit Suisse Group AG estimates. To make matters worse, bureaucrats from regions rich and poor are vying with each other to produce a national champion, seeing that the project is close to President Xi’s heart. As I wondered a year ago, what’s the advantage for Xiamen, a sleepy coastal city in southern China, or Guizhou, one of China’s poorest provinces, of getting into chip manufacturing? The result is resources spread too thin, wages bid up, and billions of dollars wasted in a business that’s all about scale.To be sure, bureaucrats the world over launch pet projects to please their bosses. But this chip craze begs the question of whether public funding is being properly used, especially as China’s economy struggles. The central government’s Big Fund and its clones aren’t dumb money — they will only finance true national champions such as Yangtze Memory; local industrial parks will have to be funded locally. The Tianjin government, for instance, doesn’t have the cash to bail out state-owned commodities trader Tewoo Group Corp., but nonetheless has a $16 billion fund for AI technology, another theme close to Xi’s heart.China’s local governments are notoriously poor: Municipals do all the dirty work of generating cash, but remit those funds to the Ministry of Finance, which then decides how to dole it out. As a result, even cities as wealthy as Beijing are deep in the red. As the economy slows and tax collection sputters, the situation will only get more severe. Local governments continue to spend more than they earn, with this year’s funding gap at 7.6 trillion yuan, Moody’s estimates. China’s desire for self-reliance is understandable. Last year, its trade deficit in chips widened to $228 billion, more than double what it was a decade earlier. Meanwhile, U.S. restrictions on exports of chip technology have provoked an intense nationalist backlash in China. Yet so far, this semiconductor drive has been all heart and no brain. To contact the author of this story: Shuli Ren at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Bitmain Technologies Ltd.’s billionaire Chief Executive Officer Wu Jihan is back in the driver’s seat following the ouster of his co-founder, touting new sales initiatives to attract clients as the company fends off rivals.Wu hosted a client meeting on Saturday, according to attendees who asked not to be identified because the event was private. It was his first public appearance since a power struggle six weeks ago when he announced as founder and chairman that his co-founder Micree Zhan Ketuan was no longer with the company. It also marked Wu’s re-emergence as the company’s CEO following his loss of control to Zhan, who had held de facto leadership from March until his resignation.Wu and other Bitmain executives announced at the event new sales initiatives to lure customers, including a promise to seek deposits as low as 20% for those who buy its Bitcoin mining rigs in large bulk, the attendees said. Usually, such deposits are 50% or full payment in advance is required. The latest models from Bitmain cost between $1,000 to $2,000. “The Bitmain you are familiar with is back,” read a presentation slide from the gathering, which took place in southwestern China’s Chengdu city, a hub for local miners. Nishant Sharma, a Bitmain spokesman, declined to comment.Bitmain revived plans for a U.S. listing earlier this year after its failed attempt in less crypto-friendly Hong Kong in 2018. The company, which was valued at about $15 billion in a private funding round last year, is grappling with intensifying competition from smaller rivals U.S.-listed Canaan Inc. and MicroBT.Canaan had a 22% market share of Bitcoin mining machines in terms of computing power sold in 2019’s first half, up from 15% for the same period last year, according Frost & Sullivan figures cited in Canaan’s IPO prospectus. While Bitmain and its major rivals produce machines with similar specs and prices, they live and die competing against each other -- and smartphone makers -- for tight chip supplies from foundries operated by Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.Bitmain’s two co-founders had long served as co-CEOs but they had been replaced this March by Zhan’s pick, Wang Haichao, as the company was grappling with lay-offs and a cash crunch triggered by Bitcoin’s price plunge. Wang is still employed by the company.In October, Wu announced Zhan’s resignation in a memo, warning employees against taking further instructions from Zhan or attending any meetings he convened. The two had started the mining gear company together six years ago.Saturday’s event reaffirms Wu’s control of the company. Fan Xiaojun, a long-time Bitmain sales chief who had been demoted by Zhan, showed up at the meeting and had regained his position, said the attendees. Bitmain also promoted Wu’s new crypto financial startup Matrixport at the event, they said. Right after Wu’s note about Zhan’s departure, Wu also announced his pick for the company’s head of human resources to replace Zhan’s appointee, according to a memo viewed by Bloomberg News.To contact the reporter on this story: Zheping Huang in Hong Kong at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Applied Materials Inc. gave a sales forecast for the current quarter that topped analysts’ estimates, suggesting a slump in orders for chipmaking equipment is ending.The company is the largest maker of machinery used in the manufacture of semiconductors, which are among the most important parts of the electronics supply chain. Customers of the Santa Clara, California-based company include Samsung Electronics Co., Intel Corp. and Taiwan Semiconductor Manufacturing Co., giving it a reach that makes its results and forecasts an important early indicator of business confidence. Intel and other chipmakers order equipment months in advance of starting new factories and production lines.Key InsightsFiscal first-quarter sales will be about $4.1 billion, Applied Materials said Thursday in a statement. That compares with analysts’ average estimate of $3.71 billion, according to data compiled by Bloomberg.Adjusted earnings per share will be 87 cents to 95 cents, the company said. Analysts projected 75 cents a share.The results “reflect a healthy uptick in demand for semiconductor equipment, combined with strong execution across the company,” Chief Executive Officer Gary Dickerson said in the statement.Chip-equipment makers often experience wild earnings swings. Machines cost tens of millions of dollars each. Delaying factory build outs is one of the fastest ways a chipmaker can preserve cash when they’re unsure of future demand.Net income was $698 million, or 75 cents a share in the period ended Oct. 27, compared with $757 million, or 77 cents a share, a year earlier.Revenue was little changed at $3.75 billion. Analysts were looking for $3.68 billion.Stock ReactionShares rose about 4% in extended trading after the announcement. The stock closed at $56.96 in New York and has increased 74% this year.More InformationFor more details, click here.To see the statement, click here.To contact the reporter on this story: Ian King in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Andrew Pollack, Alistair BarrFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Hon Hai Precision Industry Co. reported quarterly profit above analysts’ estimates, indicating solid demand for Apple Inc.’s iPhone 11 range.The assembler of most of the world’s iPhones and iPads posted net income of NT$30.7 billion ($1 billion) for the September quarter, compared with an average estimate of NT$27.7 billion.Apple last month forecast holiday revenue that surpassed Wall Street’s projections, suggesting healthy appetite for iPhone 11 models with lower entry prices and vastly improved cameras. It’s now said to expect iPhone shipments to return to growth in 2020 when it finally introduces its own 5G devices -- a boon to hardware suppliers such as Hon Hai and chipmaker Taiwan Semiconductor Manufacturing Co. coping with a decelerating smartphone market. Assembly partners like Hon Hai and TSMC typically begin gearing up for production weeks, if not months, ahead of a device’s commercial launch.The outlook for Apple and its main suppliers remains overshadowed by an ongoing trade war. AirPods, Apple Watch, HomePod and other devices made in China have been hit with 15% tariffs, and U.S. President Donald Trump hasn’t ruled out the possibility of a levy on iPhones starting Dec. 15. Hon Hai said it’s getting into the production of wearable gear next year, potentially competing for more Apple business but also increasing its exposure to the trade war.Hon Hai, which gets half its revenue from its Cupertino, California partner, is now diversifying away from its main Chinese production base to mitigate the impact of potential punitive tariffs. It’s spending more than NT$17 billion building factories in India and Vietnam, responding to customers’ needs, Chief Financial Officer David Huang said at an earnings conference. Those two countries will become regional manufacturing hubs, he added.Read more: Apple Expects IPhone Shipments to Return to Growth in 2020Hon Hai’s investment encapsulates a fundamental trend that’s beginning to shake up production of most of the world’s electronics. Taiwanese companies like Hon Hai, which today make most of the most recognizable brands, began investing in China decades ago, kicking off a transformation that’s made China the world’s factory floor. But faced with growing trade tensions and U.S. tariffs, the leaders of those companies -- which typically operate on wafer-thin margins -- are reconsidering their commitment to China.Read more: The Tycoons Behind China’s Gadget Factories Boom Prepare to ExitAlthough any pivot away from the country is just starting, factories that leave won’t come back anytime soon. In Hon Hai’s case, billionaire founder Terry Gou has even promised to shift jobs and production into the American heartland. Gou has said he intends to press ahead with construction of a display panel factory in the state of Wisconsin, an endeavor once tagged as a $10 billion investment but that has fallen far behind schedule. Vice Chairman Jay Lee said that project was “‘on track.” Hon Hai has completed initial construction on the first, main factory and the company will also target the defense and aviation markets with its panels, he added.Hon Hai executives also forecast a rebound in consumer electronics demand in 2020, which could help prop up its top line. The company reported NT$1.39 trillion in sales for the September quarter, barely changed from a year earlier. Chairman Young Liu said the firm’s goal is to achieve 10% gross margins within three to five years. Its shares closed down 1.4% ahead of the earnings on Wednesday, after gaining 27% this year.“The lower pricing of the iPhone 11 has been effective in driving demand past the Street’s expectations,” Sean Lin, an analyst at President Capital Management Corp., said in a Nov. 4 note.(Updates with executives’ comments from the fifth paragraph)To contact the reporter on this story: Debby Wu in Taipei at email@example.comTo contact the editors responsible for this story: Edwin Chan at firstname.lastname@example.org, Vlad SavovFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- You’ve got to feel for Mark Liu. The chairman of Taiwan Semiconductor Manufacturing Co. just wants to make chips.And he does; the best chips for the best companies in the world. Unfortunately, one of his clients is Huawei Technologies Co. So it’s not surprising that the world’s largest contract chipmaker has found itself in something of a pickle. On the one hand, you’ve got officials in Washington repeatedly asking Taiwan’s government to restrain TSMC from selling chips to Huawei, as the Financial Times reported Monday, citing government sources in both the U.S. and Taiwan. The Chinese electronics giant — which the U.S. has accused of spying — is one of TSMC’s top-five clients and likely contributes roughly 5% to 10% of annual revenue.On the other is China, with a government-led policy to design and build more semiconductors in the coming years. Demand from U.S. companies currently dwarfs that of Huawei and other Chinese names. American tech giants such as Apple Inc., Qualcomm Inc., Broadcom Corp. and Nvidia Corp. together account for 61% of TSMC’s revenue, and comprise the biggest buyers of the Taiwanese company’s most advanced technologies. But China is growing quickly, which leaves TSMC with an unappealing choice: Upset its current large client base in the U.S., or risk losing a future client base in China.There are two things that the U.S. is most scared about when it comes to TSMC. The first is that Chinese companies may get access to the best technology, including semiconductors, that could be used for nefarious purposes, which explains the pressure the FT cites. The other is that the U.S. itself may be cut off from the hardware supply chain, at the heart of which is TSMC.This is why U.S. officials have been hoping that manufacturers like TSMC would expand in America. At present, most of the company’s capacity is spread across three locations in north, central and southern Taiwan. It has two factories in China (the technology made there isn’t as advanced as back home) and one older facility in the U.S. Liu has politely pushed back against U.S. expansion citing the steep costs. In reality, it’s more the daunting logistics of setting up and staffing an advanced factory so far from home base where all the R&D is done. Each of its Taiwan facilities are close enough that engineers can move around and troubleshoot with relative ease. That makes TSMC the belle of the ball. Which sounds nice, except when it comes to choosing a dance partner — and Liu doesn’t want to have to decide. I’ve argued before that everyone will need to pick sides at some point as the digital Iron Curtain falls. For TSMC, this probably won’t come as a declaratory statement, but through quiet and subtle decisions on which cases it will accept and which it will turn down. This brings us back to Liu. In response to the FT report, TSMC spokeswoman Elizabeth Sun told Bloomberg News that the U.S. has not in fact asked it to stop supplying Huawei. Liu met with Commerce Department officials during a U.S. trip earlier this year where they talked about the Chinese company, she said, without elaborating on what they discussed. Meanwhile, a Taiwan cabinet spokeswoman denied that the U.S. asked its government to stop TSMC from shipping to Huawei. (1)I have covered TSMC for almost 20 years, and the notion that the Taiwan government would, or even could, tell the chipmaker what to do is hard to fathom. TSMC is Taiwan’s largest company. It’s publicly listed, has independent management and board of directors, and an impeccable reputation for corporate governance. As a chipmaker to the stars, there’s no other company in the world that can do what TSMC does in terms of technological prowess or sheer capacity. Samsung Electronics Co. and Intel Corp. are its nearest rivals.For now Liu can afford to rebuff pressure — direct or indirect — to cut off Huawei and expand in the U.S. TSMC holds all the cards because American clients desperately need the Taiwanese company’s technology, and Chinese ones aren’t big enough to buy up all of its factory capacity. It may end up offering to build a facility in America as an appeasement move.But TSMC won’t be able to sit on the fence forever. While Liu may want to just make chips, he’ll eventually have to make a choice.(1) I take the denial of Taiwan’s governmentwith a pinch of salt. It’s likely the U.S. consulted with Taiwanese officials on how to deal with the issue, though they may have stopped short of pressuring the company directly.To contact the author of this story: Tim Culpan at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Taiwan Semiconductor Manufacturing Corp. Chairman Mark Liu said the company aims to resolve chip security issues by developing new technology to track where chips go and prevent them from being tampered with. He said making chips in the U.S. is not the solution for ensuring security for defense chips.Liu made his comments at a tech forum in Hsinchu, TaiwanThe American government has contacted its customers about making semiconductors in the U.S. TSMC did not hear directly from the Pentagon about U.S. productionU.S. chip production is “very difficult” due to cost issuesTo contact the reporter on this story: Debby Wu in Taipei at email@example.comTo contact the editor responsible for this story: Peter Elstrom at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Advanced Micro Devices Inc. gave a quarterly sales forecast that was in line with analysts’ estimates, suggesting the No. 2 maker of computer processors is gaining ground on Intel Corp.Revenue in the current period will be about $2.1 billion, plus or minus $50 million, Santa Clara, California-based AMD said Tuesday in a statement. That compares with an average analyst projection of $2.15 billion, according to data compiled by Bloomberg.Under Chief Executive Officer Lisa Su, AMD has introduced a raft of new products that reviewers and some customers say are competitive or better than those from Intel. That’s sparked a surge in AMD stock. Now investors want to see evidence that the new offerings are generating more orders.AMD took share in desktop computer chips and will continue to make gains in the market for chips that power the servers that are the backbone of corporate networks and the internet, Su said on a conference call with analysts.“We remain on track to achieve our near-term goal of double-digit server CPU share by mid-next year,” she said. Su also rejected Intel’s assertion that it’s only giving up market share in chips for cheap PCs.Intel, which has about 90% of the processor market, gave an upbeat sales forecast last week and executives said they hadn’t seen increasing competition. The company’s profit is about three times the size of AMD’s revenue.On Tuesday, AMD said third-quarter net income rose to $120 million, or 11 cents a share, compared with $102 million, or 9 cents, a year earlier. Excluding certain items, profit in the recent period was 18 cents a share, meeting analysts’ projections. Revenue in the period was $1.8 billion, up 9% from the same period a year earlier. That was in line with Wall Street estimates.AMD’s gross margin, or the percentage of sales remaining after deducting the cost of production, widened to 43% in the third quarter. A year earlier, that measure of profitability came in at 40%. Minus certain items, the margin will be 44% in the fourth quarter, widening the annual number for 2019 to 43%, AMD said.The company’s shares were little changed in extended trading following the report, after ending at $33.03 at the close in New York. The stock has gained 79% this year.AMD has been trying to get back into the lucrative business of server chips. While it’s a lower-volume sector, server chips command much higher prices. AMD has about 3% of this market. The last time it was truly competitive with Intel, more than a decade ago, it had a quarter of that business.Sales of AMD’s new Epyc server chip are reported as part of a unit that includes other chips used by Sony Corp. and Microsoft Corp. in their game consoles. Demand for those processors slumped, dragging down the division’s sales by 27% from a year earlier. AMD said Epyc sales and shipments jumped more than 50% compared with the prior period.In personal computer processors and graphics, AMD’s sales increased 36% year over year. That performance was helped by the higher average selling prices of its newer products, AMD said.AMD is also trying to exploit Intel’s delays in shifting production to more advanced technology. AMD now outsources manufacturing of its best chips to Taiwan Semiconductor Manufacturing Co., which analysts calculate is more than a year ahead of Intel in implementing new processes.(Updates with comment from CEO in fourth paragraph.)To contact the reporter on this story: Ian King in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Alistair Barr, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.