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Trade War

TSMC founder sees trade dispute as 'reality show with no script'

Morris Chang warns top chipmaker faces fierce competition and unpredictable conditions

TSMC's founder Morris Chang and his wife Sophie attend a building dedication ceremony after the new management team decided to rename the company's headquarters in his honor. (Photo by Cheng Ting-fang)

HSINCHU, Taiwan -- Morris Chang, founder of Taiwan Semiconductor Manufacturing Co., said the current Washington-Beijing trade war was a "reality show" that was bringing unpredictable market conditions, with the world's largest contract chipmaker facing fierce and "very complicated" competition that is no longer just between companies.

"President Donald Trump is making the current trade conflicts between the U.S. and China a reality show with no script and no fixed casting at all," Chang told reporters on Tuesday. "Currently, businesses are not yet actors in this reality show but they could be added into the casting anytime."

"The current trade friction brings unpredictable circumstances... If the friction is protracted, it will definitely have a negative impact on global trade," he said.

Chang's comments came as the U.S. and China started to impose $34 billion-worth of tariffs on each other last Friday, officially beginning a trade war between the world's two biggest economies. Chang, 87, retired in June from the company he founded in 1987. The chip industry veteran made the remarks and took a few questions while attending a ceremony as the company's new management renamed their headquarters the "Morris Chang Building".

Chang also sent warnings to TSMC executives and employees and expressed his serious concerns about the ferocious competition that the leading chip manufacturer is currently facing on several fronts.

"We see fierce competition ahead that is no longer simply between companies or only on the business side. We face competition initiated by country states, while trade friction adds to the complexity," said Chang.

"It's international, politically intertwined and really creates a very complicated environment for doing business," said Chang. "TSMC is still doing well but we need to be on the alert."

Chang said TSMC's revenue in 2018 would exceed 1 trillion New Taiwan dollars ($32.89 billion) for the first time in the company's history.

In April, TSMC cut its 2018 annual sales growth target from 10-15% to about 10% in U.S. dollar terms, citing weak demand for premium smartphones and uncertainties in the cryptocurrency mining chip market. For all of 2017 sales were $32.11 billion.

On Tuesday, TSMC also posted June sales of NT$70.43 billion, down 16.3% year-on-year. But the company's revenue of NT$233.27 billion for the April-June period rose 9% from a year ago, which translated to $7.83 billion, based on the average exchange rate of $1 dollar versus NT$29.77 in the quarter. Analysts said the figures were in line with expectations.

TSMC's previous guidance had been for between $7.8 billion and $7.9 billion in revenue for the April-June period.

The Taiwanese chip titan controls 56% of global share in the market of making chips for others, known as the foundry business. Some 450 chip builders worldwide, including Apple, Qualcomm, Nvidia, Broadcom, NXP, Huawei's Hisilicon Technologies and MediaTek, all rely on TSMC's chip manufacturing technology.

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