World’s Largest Chip Manufacturing Company Blames Bitcoin Mining Flump for Lowering its Outlook
A prime Asian chip manufacturer minimized its revenue forecast for the year due to the unreliable nature of the cryptocurrency “mining” demand as a factor.
TSMC is also known as Taiwan Semiconductor Manufacturing, is one of the largest factories for metal casting in the world. According to Bernstein analysts, maximum demand for TSMC’s special cryptocurrency mining chips is from Bitmain, a secretive Chinese company that has become the industry leader for selling hardware to create bitcoins by mining, a secretive Chinese company that has become the industry leader for selling equipment to develop bitcoins by mining.
On Thursday, the co-chief executive officer and president at TMSC, C.C. Wei, said:
“We forecast TSMC’s 2018 revenue in U.S. dollar will be about 10 percent, rather than the previously indicated 10 percent to 15 percent, due to the smartphone weakness and the uncertainty in cryptocurrency mining demand.”
The Taiwanese company also designs chips to perform calculations required to check cryptocurrency transactions in a process known as “mining.”After solving these complicated mathematical equations, miners are rewarded bitcoin, which was trading near $8,200 Thursday, according to Coindelite.
In the first quarter need for cryptocurrency mining was strong and could continue in the second quarter, according to TSMC. But the company said that some weaker demand is visible in the 28-nanometer product line used for cryptocurrency mining hardware.
Morgan Stanley reckons that about 10 percent of Taiwan Semiconductor’s revenue now is determined by the cryptocurrency mining demand. If bitcoin’s price were to lessen, that would lead to cuts into TSMC’s lowered revenue forecast, equity analyst Charlie Chan and his team said in a note Thursday.
The report said:
“Even if the Bitcoin price stays the same in 2H18, we believe mining profits would drop rapidly, according to our simulation.”
Bitcoin has been unpredictable this year and has lost more than half its value since the cryptocurrency attained a high above $19,000 in December. Its price has prevailed in a trading range this year between regulatory uncertainty and tax-related selling.
Bitcoin’s one-week performance
Source: Coindelite Price Chart
According to a Bernstein report in February, Cryptocurrency mining chips contributed to 4.5 percent of TSMC’s total revenue in the third quarter of last year, adding to a total $900 million or 2.8 percent in revenue for 2017.
Bitmain which is based in Beijing is one among the top five customers of TSMC chips and made $3 billion to $4 billion in operating profit in 2017, compared to chipmaker Nvidia, the Bernstein analysts said.
Leading technology firms namely, Apple and Nvidia also use chips manufactured by TSMC, where both were trading at 1.4 percent lower following the earnings report Thursday. Meanwhile, shares of Taiwan Semiconductor Manufacturing fell by 5 percent.