The world’s largest wafer foundry, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), is expected to achieve higher factory utilization next quarter, lifted by rush orders in October, Barclays Capital Securities Taiwan Ltd said.
The rush orders will come from its major clients, such as chip designer MediaTek Inc (聯發科), iPhone maker Apple Inc as well as video game console developers Sony Corp and Microsoft Corp, ahead of their new product launches in the coming quarters, Barclays analyst Andrew Lu (陸行之) said in a note released on Thursday.
“Despite weak order visibility, TSMC should still be able to fill up its fabs for the fourth quarter,” Lu wrote.
This assessment has brought some comfort to the company in the traditionally slow fourth-quarter, especially after TSMC chairman and chief executive Morris Chang (張忠謀) on July 18 indicated a sequential sales decline for that quarter due to inventory adjustments in the supply chain.
The percentage of total capacity TSMC will use — known as the factory utilization rate — is forecast to climb to between 85 percent and 90 percent next quarter from 70 percent to 75 percent for its 12-inch wafer fabrication facilities and from between 85 percent and 90 percent for the 8-inch plants, according to Barclays’ estimate.
TSMC’s shares ended 2.64 percent higher at NT$97 yesterday following Barclays’ forecast, after the shares have retreated by about 8 percent since July 18 when Chang gave his conservative outlook for this quarter and next quarter.
The recent decline of TSMC’s share price also reflected investor concerns about the company losing orders for wafers using its 28-nanometer (nm) process technology to GlobalFoundries Inc.
However, Lu did not think that would have a significant impact on TSMC’s business.
“We estimate some 28nm orders switching to GlobalFoundries from TSMC could affect TSMC’s fourth-quarter sales by only 2 percent to 3 percent, as competitors are still struggling with a lower yield of between 10 percent and 20 percent and a lack of capacity,” he wrote.
Credit Suisse AG analyst Randy Abrams also expects overall supply-chain inventory to be under control, paving the way for a rebound in the industry during the first half of next year.
“We expect the inventory correction to remain manageable,” Abrams said in his report yesterday, adding that TSMC would see destocking shift to restocking and its business will be supplemented by a production ramp-up of wafers using 20nm process technology.
Another semiconductor industry analyst at Yuanta Investment Consulting Co (元大投顧) said the signs of an upswing at TSMC are not obvious, as rush orders do not lead to sustainability.
“Our supply-chain checks do not suggest clear signs of order recovery, so we expect TSMC’s utilization rate would only stay at about 80 percent in the fourth quarter,” Yuanta analyst Felix Hsu (徐凰原) said in a separate note.
To factor in the impact of weaker market sentiment in the second half of the year, Barclays revised downward its earnings per share (EPS) forecast for TSMC by 3 percent to NT$6.87 this year, which is compared with Yuanta’s estimate of NT$7.2.
TSMC reported EPS of NT$6.14 last year.