Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday posted a quarterly net profit that slightly surpassed analysts’ expectations and forecast revenue this year would grow by a double-digit percentage point on the back of strong demand for mid-and-low-end smartphones.
TSMC’s financial results for the quarter ending on Dec. 31 showed its net income dropped 13.74 percent to NT$44.81 billion (US$1.48 billion) from NT$51.95 billion in the third quarter. However, that figure represents an increase of 7.7 percent from NT$41.6 billion on an annual basis.
Last quarter’s net profit beat the expectations of most analysts, including Citigroup’s Roland Shu (徐振志) and Credit Suisse’s Randy Abrams, who estimated TSMC would make NT$41.23 billion and NT$41.61 billion in net income respectively.
TSMC chairman Morris Chang (張忠謀) told an earnings briefing for investors and analysts in Taipei that revenue growth will outpace the 10 percent annual growth forecast for the whole foundry industry and the 5 percent annual expansion in revenue for the worldwide semiconductor industry.
“In terms of market segments, smartphones and tablets are our growth engines,” Chang said.
He said he expected global smartphone shipments to grow 25 percent year-on-year this year, with the strongest growth from low-end models, while tablet shipments would grow 21 percent.
“TSMC’s revenue from mobile products is set to grow more than 35 percent this year,” Chang said.
He attributed the growth to the increase in silicon content for mobile devices and TSMC’s higher share in non-memory silicon content of those devices.
The world’s biggest contract chipmaker plans to spend US$9.5 billion to US$10 billion on new equipment this year. It spent a record US$9.5 billion last year.
However, UBS Securities chief semiconductor analyst Jonah Cheng (程正樺) said he was concerned about the company’s prospects.
“It is a question of whether TSMC can translate revenue growth into profit growth, given its massive capital expenditures and high deprecations,” Cheng said.
The UBS Securities analyst retained his “neutral” rating on TSMC’s shares, making him a maverick among foreign brokerage analysts, who are more bullish on the stock.
Daiwa Capital Markets analyst Eric Chen (陳慧明) on Tuesday upgraded his rating on TSMC from “hold” to “out-perform,” citing strong business opportunities.
Chen said he expected orders for Apple Inc to supply the iPhone 6 processor, or A6, to contribute 5 percent of the chipmaker’s total revenue this year.
TSMC gave a slightly weaker outlook for the current quarter.
Revenue is expected to shrink by between 5.36 percent and 6.7 percent to between NT$136 billion and NT$138 billion, compared with last quarter’s NT$145.81 billion, it said.
“The first quarter is a seasonally weak quarter for IC companies, including us. And the supply chain continues to manage inventory conservatively, even though inventories have already reached below seasonal levels,” Chang said. “From the second quarter on, we will see a strong growth.”
Shu forecast TSMC’s revenue will slip by 1.7 percent sequentially to NT$143.3 billion this quarter, while Abrams predicted a 3.5 percent decline to NT$140.67 billion.
Shu gave the firm a “buy” rating and Abrams an “outperform” rating.
TSMC’s 28 nanometer process technology and 20 nanometer segment would be the main growth engines this year, Chang said.