If a New Year's Eve report from Japan's Nikkei gave some indication that iPhone 7 demand has slowed following a hot start, the guidance included in Taiwan Semiconductor's (TSM - Get Report)  fourth-quarter earnings report on Thursday appears to confirm it.

And with the caveat that a lot could change on this front in the coming months, the guidance also suggests iPhone 8 sales expectations are measured for the time being.

TSMC, the world's biggest chip contract manufacturer and a company that counts Apple (AAPL - Get Report) and many of its chip suppliers as clients, reported Q4 sales of NT$262.2 billion (up 29% annually and equal to $8.27 billion) and EPS of $0.61. The former topped an initial forecast of NT$255 billion to NT$258 billion, but was already telegraphed via monthly sales reports. The latter beat a $0.58 consensus analyst estimate.

However, citing "mobile product seasonality and slightly above seasonal supply chain inventory at the end of 2016," TSMC guided for Q1 revenue of NT$236 billion to NT$239 billion ($7.44 billion to $7.53 billion). That's unfavorable to a $7.53 billion pre-earnings consensus, and implies 17% annual growth at the midpoint.

TSMC also guided for revenue to grow by 5% to 10% over the whole of 2017, with about 10% growth expected during the first half of the year and about 5% during the second half. The pre-earnings consensus was for close to 10% 2017 sales growth. Global smartphone shipments are expected to rise 6% in 2017, a little better than in recent quarters, with stronger growth coming on the low-end.

And TSMC's 2017 capital spending budget (subject to change over the course of the year) has been set at $10 billion, which implies a slight decline in capex from 2016's $10.2 billion.

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Taiwan Semi shares fell 2.9% on Thursday. Apple suppliers Cirrus Logic (CRUS - Get Report) , Micron (MU - Get Report) , Skyworks  (SWKS - Get Report) (downgraded today) and Synaptics  (SYNA - Get Report)  also underperformed on a day the Nasdaq fell 0.3%.

Apple itself is down 0.7%, and chip equipment makers such as Applied Materials (AMAT - Get Report) , KLA-Tencor  (KLAC - Get Report) and Lam Research  (LRCX - Get Report) are generally seeing modest declines. Apple's own December quarter report arrives on the afternoon of January 31.

TSMC's numbers come after the Nikkei reported that Apple is cutting iPhone production by about 10% annually in Q1 due to sluggish demand. The paper added that demand for the iPhone 7 Plus, which has a dual-lens camera on its back, is still strong, but that camera sensor shortages have prevented Apple from addressing all of it.

At first glance, guidance for about 10% first-half sales growth suggests the Nikkei's report is too pessimistic. However, it's worth keeping in mind TSMC's sales were depressed in Q1 2016 (down 8% annually) due to a chip industry inventory correction and the impact of a Taiwanese earthquake. They improved in Q2, rising 8% with the help of inventory restocking.

Also, even if iPhone production is lower in early 2017 than a year ago, TSMC's sales to Apple will likely be higher, since the company is the sole manufacturer of the A10 processor that goes into the iPhone 7 after jointly producing the A9 processor found in the iPhone 6S with Samsung. That, along with solid early demand for the iPhone 7, is a big reason TSMC's sales were up over 20% in both Q3 and Q4.

The company is also believed to be the sole manufacturer of the A11 processor going into this year's iPhones. The A11 is expected to be one of the first products to rely on TSMC's cutting-edge, 10-nanometer, manufacturing process, which has been set to enter volume production this quarter.

With its strong performance over the last two quarters making for tougher annual comparisons, TSMC will likely need orders related to this year's iPhone launches to be sharply above those for last year's in order to post double-digit sales growth during the back half of 2017. The company's second-half sales and full-year smartphone guidance points to more moderate shipment growth.

This, in turn, could lend credence to recent reports stating three iPhones will launch in 2017, only one of which will feature a curved OLED display. Two other models will -- like present-day iPhones -- feature LCD panels. Supply constraints are reportedly responsible for only one OLED iPhone being prepped for 2017.

The nature of smartphone upgrade cycles could also have something to do with TSMC's outlook. iPhone 7 sales received a boost in the fall of 2016 from the fact that iPhone 6 sales were very strong two years earlier, creating a large base of iPhone 6 owners looking to upgrade. iPhone 6S sales were notably weaker, which -- even if the rumored OLED iPhone manages to impress -- could limit this year's upgrade activity.

Things could easily look different in September. This year's iPhones, which are expected to see several hardware improvements outside of the introduction of an OLED model, could be much more popular with consumers than currently expected. It's also possible that OLED constraints won't be as bad as presently feared.

But TSMC apparently has its reasons for taking a cautious view on demand. And markets will likely remain cautious as well until they receive information that makes them reconsider.