Weakening Crypto Mining Demand to Affect Growth, Taiwanese Chip Maker

Taiwan Semiconductor Manufacturing Company (TSMC) expects the overall semiconductor market excluding memory to grow between 5% and 7% for the full year of 2018. In Q4 2018, the chip maker’s business is to benefit from the continuous steep ramp of 7-nanometer for high-end smartphones and the demand for 16/12-nanometer for new-generation GPU and AI. However, its projected growth for the period will be affected by continued weakness in cryptocurrency mining demand and inventory management by its customers.

Chip maker, TSMC, sees a ‘continued weakness in cryptocurrency mining demand’

The chip maker notes in its latest earnings call that its second half of 2018 business will be strongly supported by the 7-nanometer ramp-up driven mainly by a few new smartphone launches.

“However, our business is also negatively impacted by further weakening of cryptocurrency mining demand,” says its CEO/Vice Chairman, C. C. Wei during the update. “As a result, we estimate our 2018 growth rate will be about 6.5% in U.S. dollar term, which is close to the foundry industry’s growth but slightly below our 7% to 9% guidance given in the last conference.”

TSMC has been Bitmain’s single largest supplier since its incorporation. For the years ended 2015, 2016, 2017 and the six months ended June 2018, TSMC accounted for approximately 44.8%, 58.5%, 58.6% and 59.2% of the crypto mining manufacturer’s total procurement respectively. Bitmain notes in its recent IPO filing that any inadequacy on the part of TSMC could affect their product delivery cycle.

Wei adds that their inventory correction will be much less in 2019 to have a growth rate on the high side of 5% to 10% despite the adverse impact they had seen from customer inventory and cryptocurrency that affected their overall growth target for 2018. The the weakness in cryptocurrency mining is also making the company plan to increase installed wafer capacity from 10,000 to 20,000 wafer per month next year.

TMSC’s update comes as a new mining farm which considers itself as one of the ‘world’s largest’ was opened in Yerevan, Armenia by the country’s Prime Minister, Nikol Pashinyan. News Armenia reports that the project has an investment of about $50 mln with businessmen from 40 countries including China, South Korea and the United Arab Emirates in attendance at the opening ceremony.

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