Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, yesterday said it planned to boost capital spending by 80 percent this year after more than doubling its net profit last quarter.
Last quarter, net income leapt to NT$32.67 billion (US$1.02 billion), compared with NT$12.45 billion in the same period a year earlier, a company statement said. TSMC beat most analysts’ expectations by reporting the strongest quarterly earnings since the fourth quarter of 2007.
The Hsinchu-based chipmaker said record spending on new equipment was aimed at satisfying better-than-expected customer demand for chips made on advanced technologies and to safeguard its technological leadership amid growing competition.
“We do have a shortage of capacity, particularly in advanced nodes,” chairman Morris Chang (張忠謀) told investors yesterday.
Because of expected demand, TSMC accelerated capital expenditure in the second half of last year.
This year, TSMC plans to spend a record US$4.8 billion on new facilities and equipment mostly for developing new 40-nanometer and 28-nanometer technologies, a spike from last year’s US$2.67 billion.
“It [US$4.8 billion] is a very large number,” said Steven Pelayo, who tracks the semiconductor industry for HSBC Securities in Taipei. “So that means in the second half of the year there will be lots of capacity on 12-inch fabs. GlobalFoundries will also have more. There is certainly more risk as utilization will be not so high, which will have pressure on margins.”
The significant capacity expansion reflected growing optimism on the global semiconductor industry and contract chip industry this year.
Chang raised his forecast for the global semiconductor industry’s revenue growth this year to 18 percent year-on-year yesterday on robust end product demand, from 9 percent previously. Growth for the contract chip, or foundry, industry would increase 29 percent this year, rather than 16 percent, Chang said.
TSMC would outgrow the foundry market by a bit, Chang said.
Alleviating concern on the risk of price erosion from aggressive capacity expansion, Chang said: “I believe there is a minimal risk in the most advanced nodes of overcapacity. With the remaining nodes, I believe we are going to win, if the battle comes.”
Factory utilization is expected to be nearly 100 percent in all technologies in all factories owned by TSMC, Chang said.
The first quarter, however, would be a conventionally slack season for the industry, with a quarterly revenue decline in the low single digits, which is a little better than the historical average, Chang said.
Tracking this downtrend, TSMC’s revenues may fall to between NT$89 billion and NT$91 billion. That would mean a quarterly contraction of 3.36 percent at the most, from last quarter’s NT$92.09 billion.
Gross margin may be between 46.5 percent and 48.5 percent this quarter, from last quarter’s 48.5 percent.
“That is a strong forecast,” said Michael Chou (周立中), a semiconductor analyst with Deutsche Securities Asia Ltd’s Taipei Branch. “It is forecasting a higher gross margin than I am, perhaps because of improving yield at 40-nanometer technology.”
Chou expected TSMC’s gross margin to be 47.8 percent in the current quarter.