TSMC sees decline in orders placed by Huawei

The logo of Taiwan Semiconductor Manufacturing (TSMC) is seen in this undated file photo. (NOWnews file photo)

TAIPEI (CNA) — Orders placed by Chinese telecom equipment supplier Huawei Technologies Co. have declined amid weakening global demand for high-end smartphones, Taiwan Semiconductor Manufacturing Co. (TSMC) Chairman Mark Liu (劉德音) said on June 5.

Speaking with reporters after an annual general meeting, however, Liu said its shipments to Huawei are continuing, despite an executive order issued by U.S. President Donald Trump in mid-May to ban the technology and services of “foreign adversaries,” which apparently targeted the Chinese tech company.

Since then, Google Inc. has restricted Huawei’s access to its Android operating system and has limited access to its apps such as Gmail and the Google Play store in new handsets made by Huawei.

In addition, other tech giants such as ARM Holdings, Intel, Qualcomm, Broadcom and Micron Technology have also announced suspension of business or termination of cooperation with Huawei, which has had an impact on sales of the world’s second-largest smartphone brand after Samsung Electronics Co.

According to an estimate by market analysts, Huawei accounts for about 10 percent of TSMC’s total revenue each year.

Liu, who has been TSMC chairman since founder Morris Chang (張忠謀) retired June 5 last year, said that due to falling demand for high-end smartphones, the production capacity utilization of its wafer plant located in Nanjing, China, has been on the decline from full utilization, which market analysts said was seen last year.

While TSMC, the world’s largest contract chipmaker, did not directly link the fall in capacity utilization at the Nanjing plant to Huawei’s reduced orders, analysts said Huawei was behind the lower capacity utilization.

Previously, TSMC had planned to expand the Nanjing plant’s monthly capacity to 15,000 units by the end of this year and to 20,000 in 2020, up from the current 10,000.

Adopting a more cautious tone now, however, Liu said the expansion plan is subject to change based on market conditions.

Liu said TSMC always abides by export and import controls by the U.S. when it ships chips to its clients and after careful review, has found it is not necessary for the company to change its policy on shipments to Huawei.

Earlier this week, local media reported that the U.S. Department of Commerce sent a delegation to TSMC to launch a probe into the chipmaker’s shipments to Huawei to make sure the sales do not contradict U.S. rules.

Liu rebutted the reports, saying that no U.S. officials have ever talked to TSMC about its shipments to Huawei.

Meanwhile, Liu said, TSMC is studying the feasibility of setting up a new plant or acquiring a semiconductor plant in the U.S. amid rising global trade tension, but he stressed that the company’s core investments are still located in Taiwan, with a strong research and development base here.

In the annual general meeting, shareholders approved a proposal for TSMC to issue NT$8 (US$0.25) in cash dividend per share, based on its 2018 earnings. TSMC said it has decided to go ex-dividend June 24 and to issue the cash dividends in July.

Shareholders also approved an amendment to the company’s charter to pay the dividends on a quarterly basis instead of annually.

A board meeting will also be scheduled to vote on a proposal to issue an additional NT$2 cash dividend in the fourth quarter for 2018 earnings.

By Chang Chien-chung and Frances Huang