Though soft demand from Apple (AAPL - Get Report) and others is set to weigh heavily on Taiwan Semiconductor's (TSM - Get Report) first-half sales, for now markets are judging the chip giant's outlook to be better than feared.

On Thursday morning, TSMC, easily the world's biggest chip contract manufacturer (foundry), reported Q4 revenue of NT$289.77 billion (up 4% annually and equal to $9.39 billion) and EPS of $0.63. Revenue was already known thanks to monthly sales reports; EPS beat a $0.62 consensus.

More importantly, for the seasonally softer first quarter, TSMC guided for revenue of $7.3 billion to $7.4 billion. That represents a 13% annual decline at the midpoint and is below a consensus of $8.05 billion.

For the whole of 2019, TSMC -- citing a "slowing economic environment" -- now expects its revenue will only "grow slightly." The pre-earnings consensus was for revenue to grow about 6% in dollars.

Nonetheless, after opening lower, TSMC's shares are currently up 2.1% in Thursday trading to $36.40, amid a 0.9% gain for the Nasdaq. The Philadelphia Semiconductor Index is also up 0.9%.

Here are some notable takeaways from TSMC's earnings report and call.

1. Customer Inventories Are Elevated -- And Not Just for Smartphones

iPhone sales pressures clearly have a lot to do with TSMC's outlook; TSMC manufactures Apple's A-series processors and other Apple silicon, as well as chips for iPhone suppliers such as Broadcom (AVGO - Get Report) and Cirrus Logic (CRUS - Get Report) . And on its call, TSMC said that "recent changes" in business conditions for the high-end smartphone market will yield a "substantial cutback" in the utilization rate for its 7-nanometer (7nm) manufacturing process, which is used to make Apple's A12 Bionic system-on-chip (SoC) and (in lower volumes) Huawei's Kirin 980 SoC.

Chairman Mark Liu later suggested that there's "quite a lot" of supply chain inventory related to high-end smartphones, and that there was a "sudden" drop in Q1 orders from the space.

There appear to be pressures in other markets as well, however. CFO Lora Ho stated the semiconductor industry's total inventory exiting 2018 was "at a much higher level than seasonal." Later, Liu suggested industry inventory levels were about 10 days higher above seasonal norms exiting 2018.

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2. TSMC Is Being Cautious with its 2019 Capital Spending Plans

Last July, citing a "schedule adjustment" and "efficiency gains," TSMC cut its 2018 capex budget to a range of $10 billion to $10.5 billion from a range of $11 billion to $12 billion (capex ultimately totaled $10.5 billion). But in spite of its restrained 2018 spending, TSMC, citing its current macro outlook, is only guiding for 2019 capex of $10 billion to $11 billion.

Research firm Semiconductor Advisors sees this outlook as bad news for Applied Materials (AMAT - Get Report) , and to a lesser extent for KLA-Tencor (KLAC - Get Report) and ASML (ASML - Get Report) . Like TSMC, chip equipment makers have priced in a lot of bad news already, and most are ticking higher in Thursday trading.

3. TSMC Still Expects Its Mobile Chip Sales to Grow in 2019

In spite of its iPhone woes and broader weakness in smartphone unit sales, TSMC expects its mobile chip sales to see modest growth this year. A second-half pickup in demand (aided by new iPhone launches) is expected to help, but so is growth in the silicon content found within the average high-end smartphone.

Notably, though 5G's ramp is still in its early stages, CEO C.C. Wei said that the RF complexity of 5G phones, which will need to support high-frequency mmWave spectrum in addition to traditional mobile spectrum bands, is one of the factors driving this content increase. Skyworks (SWKS - Get Report) , Qorvo (QRVO - Get Report) , Broadcom  (AVGO - Get Report) and Qualcomm (QCOM - Get Report) have all been quite upbeat about 5G's ability to help them grow their RF chip sales.

4. TSMC Is Maintaining its Long-Term Revenue Forecast

On the call, TSMC said it still expects to grow its revenue at a 5% to 10% compound annual rate from 2017 through 2021. In addition to rising smartphone chip content, the company also remained upbeat about its growth opportunities in what it calls high-performance computing (a catch-all phrase meant to cover a number of GPU and data center opportunities), as well as in automotive and IoT end-markets.

5. TSMC Is Intent on Keeping its Recently-Won Manufacturing Tech Lead

TSMC's 7nm production ramp during the second half of 2018 gave it a manufacturing process lead against Intel (INTC - Get Report) , which only expects PCs featuring CPUs based on its delayed 10nm process (seen as competitive with TSMC's 7nm process) to start shipping in volume during the 2019 holiday season. It also gave TSMC a leg up against foundry rivals such as Samsung (SSNLF) and Globalfoundries; in October, Globalfoundries threw in the towel on trying to keep up with TSMC's leading-edge process nodes.

The company's earnings call remarks made it clear that (in spite of a cautious 2019 capex budget) it plans to keep pushing the envelope when it comes to manufacturing technology. A 7nm+ process that delivers moderate performance and power consumption improvements relative to standard 7nm is due to enter volume production in Q2, and its next-gen 5nm process is forecast to enter volume production during the first half of 2020.

Look for Apple to use the 7nm+ process to make the processors going inside of its 2019 iPhones, and the 5nm process to make the ones going into its 2020 iPhones. Other marquee TSMC clients such as Nvidia (NVDA - Get Report) , AMD (AMD - Get Report) , Qualcomm and MediaTek also have to be pleased with its manufacturing aggressiveness and execution.