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Taiwan Braces for Earnings Gloom as IPhone, Trade War Bite

Bloomberg logoBloomberg 11/19/2018 Yu-Huay Sun

(Bloomberg) -- Disappointing earnings may not be over for Taiwan companies, dragged by waning demand for Apple Inc.’s flagship iPhone and deteriorating relations between the island’s two biggest trade partners.

Net income for companies on the Taiex index is expected to drop 9.2 percent on-year this quarter after undershooting estimates in the three months through September, the first miss since the second quarter of 2017, according to data compiled by Bloomberg.

In a market where semiconductor firms account for more than a quarter of the benchmark’s weighting -- Taiwan Semiconductor Manufacturing Co. alone accounts for 21 percent -- the performance of tech giants like Apple can sway earnings. Suppliers including Hon Hai Precision Industry Co. saw disappointing profits after Apple reported stagnant iPhone sales and a worse-than-expected revenue forecast.

a screenshot of a cell phone: Falling Short© Bloomberg Falling Short

READ: Apple’s Outlook Dims as Suppliers Worldwide Sound the Alarm

Sino-American tensions have continued to simmer. U.S. Vice President Mike Pence said during the weekend that the U.S. wasn’t in a rush to end the trade war and would “not change course until China changes its ways.”

With trade frictions threatening to increase costs for manufacturers and consumers, and with economic growth slowing, earnings for Taiwan companies could slide in the coming quarters, said Richard Lin, vice president at Reliance Securities Investment Consultant Co. “We’ll see the impact from the China-U.S. trade war gradually.”

Signs of a slowing economy have emerged of late, with the island’s exports rising at a slower-than-expected pace in October. Several board members of the central bank saw the need to consider interest-rate adjustments so that Taiwan has sufficient flexibility in monetary policy in face of a future global economic slowdown, according to its meeting minutes released earlier this month.

READ: Taiwan Growth Slows as Trade Tensions Prompt Consumer Caution

Companies that missed estimates include

TSMC’s Sales Outlook Falls Short as Smartphone Demand StallsHon Hai’s Profit Miss Reflects Growing iPhone-Supplier WoesUni-President Third Quarter Net Income Misses EstimatesAcer Third Quarter Net Income Misses Lowest EstimateTPK Holding Third Quarter Net Income Misses Lowest EstimateChunghwa Telecom Third Quarter Net Income Misses Lowest Estimate

Companies that beat estimates include

Quanta Third Quarter Net Income Beats Highest EstimateMediaTek Third Quarter Net Income Beats Highest EstimateInnolux Third Quarter Net Income Beats Highest EstimateAU Optronics Third Quarter Net Income Beats Highest Estimate

(Updates with U.S. vice president’s comment in fourth paragraph.)

--With assistance from David Watkins.

To contact the reporter on this story: Yu-Huay Sun in Taipei at

To contact the editors responsible for this story: Richard Frost at, Ron Harui, Kana Nishizawa

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