Things were better before China got all these phones. When China didn’t have phones, China wanted phones. A whole lot of phones. For the last few years, the smartphone-hungry citizenry of the world’s most populated country fueled an ever-increasing boom for handsets and ergo all the components that make them up. But now that the Chinese mobile market is becoming saturated, businesses like TSMC are starting to feel the crush first.
Taiwan Semiconductor Manufacturing Company is the world’s largest contract chipmaker. In 2014, Chairman Morris Chang proudly forecasted that the company believed that they were looking at 10 percent annual growth over the next five years. Now after fourth-quarter sales of 2015 dropped for the first time since 2011, TSMC is staring down the barrel of a lackluster first quarter of 2016. The company’s tone has taken on a much gloomier affect, with Chang announcing, “I had expected the first quarter to be stronger than what we’re forecasting now… I am not repeating my pledge, my prediction, that ‘17, ‘18, ‘19 will continue to grow at 10 percent.”
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TSMC’s main client is Apple, who uses their chips in iPhones. Although the non-Android market is 33% stronger in China than it was at the beginning of 2015, demand for smartphones across the board is beginning to cool down. This is especially hitting high-end devices hard, and TSMC’s highest end chips account for nearly a quarter of their sales.
What are your thoughts on this turn of events for Taiwan Semiconductor Manufacturing Co? Will chipmakers be suffering in the coming years as the market cools, or do they simply need to readjust their expectations now that the Chinese surge for smartphones is starting to wane? Let us know in the comments below!