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Why Apple Investors and Others Aren't Panicking About Taiwan Semi's Soft Guidance

Taiwan Semiconductor Manufacturing Co.'s (TSM) light Q3 guidance backs up the flurry of reports that have emerged indicating this year's iPhone production ramp will take longer than usual to unfold due to iPhone 8 production challenges. And the market's indifference to the outlook, as reflected by how little TSMC's shares or those of other Apple Inc. (AAPL) suppliers are moving, suggests a delayed iPhone 8 ramp isn't worrying investors much.

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TSMC, by far the world's biggest chip contract manufacturer (foundry), reported Q2 revenue of NT$213.9 billion ($7.06 billion) and EPS of NT$2.56 ($0.42 per U.S.-listed share, and down 8.6%). Revenue had already been telegraphed by monthly sales reports, while EPS slightly missed a $0.43 consensus.

Revenue fell 3.6% annually on a Taiwanese dollar basis, but grew 3.2% on a U.S. dollar basis. TSMC had issued below-consensus Q2 guidance in April, while blaming a strong Taiwanese dollar (it has appreciated 6.6% against the U.S. dollar since Q2 2016) along with inventory corrections at smartphone and PC chip clients. That was seen as a reference to corrections...