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Slower growth for chip sector: TSMC

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) said yesterday overall annual revenue growth of the semiconductor industry would slow down 5 percent to 10 percent during the next decade.

Chang said that TSMC, the world's biggest contract chipmaker, would grow faster.

TSMC has outpaced most semiconductor companies by expanding revenues at a 43 percent annual rate over the past 20 years, compared to the industry's 11 percent average growth, he said.

"The semiconductor industry will probably grow at a composite average annual growth rate of 5 percent to 10 percent in the next 10 years," Chang said in a speech at a forum marking the chipmaker's 20th anniversary in Taipei.

"We believe ourselves and our partners will grow more strongly than the [rest of the] semiconductor industry," Chang said.

To that end, the Hsinchu-based chipmaker would broaden its technology offerings -- from flash memory chips to CMOS image sensors -- with the exception of its core product logic chips, Chang said.

TSMC's customers, including Texas Instruments Inc, Qualcomm Inc and Freescale Semiconductor Inc, sent high-ranking executives to attend the forum, who provided a long-term perspective on the sector.

Over the next 10 years to 20 years, the growth driver would primarily be emerging markets like China and India, they said.

"One of the big drivers will be wireless [systems] that [connect] any consumer with any computing device," said Sanjay Jha, chief operating officer of Qualcomm during a discussion panel organized by TSMC.

At present, 4.8 billion people globally have mobile phone coverage, but only 2 billion people have mobile phone subscriptions, Jha said. China and India are the largest markets, he added.

Last year, TSMC posted a 19 percent increase in revenues to NT$317.41 billion (US$9.54 billion) year-on-year, compared to 8 percent to 9 percent growth for the industry.

Chang said the company would boost research and development spending by 13 percent annually to US$600 million, despite the forecast for a slower revenue increase this year.

Capital expenditures would also rise 12 percent to US$2.8 billion from US$2.5 billion last year, Chang said.

"They need to maintain their technical edge," said Albert King, who manages US$10 million in assets as chief investment officer at Prophet Capital Inc in Taipei.

"If they want to outgrow the industry, they have to keep doing things different to the rest of the industry," he said.

TSMC has budgeted US$2.8 billion for this year to boost capacity and improve production technology.

The company spent US$2.46 billion to this end last year.

Additional reporting by Bloomberg
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