The Trump administration's latest move to slap a 10% tariff on the remaining US$300 billion worth of Chinese imports, including handsets, notebooks and TVs, starting September 1 may significantly dent the sales upturn momentum for terminal markets, which in turn will cloud the prospects for relevant supply players, with even TSMC and Intel very likely to adjust downward their guidance at least for the fourth quarter of the year, according to industry sources.
Taiwan handset and notebook supply chain partners will be hardest hit by the new tariffs. Handset sales prices may rise in the US market, the largest iPhone outlet absorbing 68 million units in 2018. The upcoming iPhones, unlikely to offer too many wowing features, may see weak sales, forcing Apple to cut orders in the fourth quarter of 2019, as it did to iPhone 6s and iPhone 7s, the sources said.
Supply chain partners are expected to accelerate shipments by the end of August at the request of Apple, but they are more concerned about their next wave of orders from the US vendor and its pricing strategy for the new and existing China-sourced iPhones bound for the US after September 1.
In recent years, Apple's suppliers have been asked to absorb hikes for materials prices and labor costs. They hope Apple will raise iPhone pricing to reflect additional tariff costs, instead of passing the costs onto the supply chain, reducing their already slim profit margins, the sources continued.
TSMC optimism to be challenged
Before the US announced the additional tariffs, TSMC offered an optimistic outlook, estimating its revenues would increase in second-half 2019 on robust demand for high performance computing (HPC) chips and high-end smartphones as well as accelerating 5G infrastructure construction. But if the new tariff scheme affects iPhone sales in the US forcing Apple - TSMC's largest client with an annual revenue contribution ratio of 22% - to cut orders in the fourth quarter, the foundry may not achieve its goal of a slight increase in its 2019 to hit a record high, the sources commented.
Notebook vendors have already built up extra inventory since Trump revealed his tariff plan in May, allowing them to meet back-to-school demand and Christmas shopping without hiking prices. But the high inventory would be risky once terminal buying sentiment is dampened by growing market uncertainties after the new tariffs take effect or are even hiked to 25% later, the sources indicated.
As notebook vendors are much concerned about whether their inventories can be smoothly digested in the second half of the year, they may turn conservative about placing orders for processors. This may significantly impact Intel's sales, forcing it to lower its financial guidance for 2019, the sources noted.
Article translated by Willis Ke
