Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, yesterday reported record earnings for last quarter and said it expects revenue to hit new highs this quarter and the momentum to carry on into the next quarter.
TSMC’s net profit surged 24.71 percent to NT$59.7 billion (US$1.99 billion) last quarter from NT$47.87 billion in the first quarter of the year.
The result was better than the NT$56.92 billion forecast by Credit Suisse analyst Randy Abrams and the consensus of NT$56.06 billion, a figure compiled by the brokerage.
This quarter, revenue is expected to grow by 12.56 percent to 14.19 percent to NT$206 billion to NT$209 billion, compared with last quarter’s NT$183.02 billion, TSMC chief financial officer Lora Ho (何麗梅) said.
The forecast was higher than most brokerages’ estimates, including Abrams’ forecast of 12.85 percent sequential growth for the current quarter and the consensus of NT$196.48 billion.
Abrams rated TSMC “outperform,” with a price target of NT$150, implying 15 percent upside over the next 12 months from the stock’s closing price of NT$130.50 yesterday.
Operating profit margin is forecast to climb to between 38.5 percent and 40.5 percent this quarter from last quarter’s 38.6 percent, TSMC said.
“The widespread adoption of 4G LTE [long-term evolution smartphones] tends to increase the demand for our 28 nanometer [nm] and 20 nanometer technologies,” TSMC chairman Morris Chang (張忠謀) told investors.
“Overall, we are guiding that the third quarter will be another record-breaking quarter in terms of revenue, operating income and net income,” Chang said.
Because of TSMC’s strength in 28nm and 20nm process technologies, revenue is expected to post sequential growth next quarter, Chang said.
TSMC holds about 80 percent share of the global 28nm chip market and led the competition in shipping 20nm chips last month to a major client, which industry insiders believe is Apple Inc. The US tech giant is expected to launch a new iPhone model this quarter.
TSMC expects robust demand to boost revenue contribution from 20nm chips to about 10 percent this quarter and to more than 20 percent next quarter, where it would stay for the whole of next year.
To allay investor concern that the growth momentum would primarily be driven by Apple’s demand for 20nm chips because demand for other technologies would be weak due to inventory correction, Chang said: “If we take out [the contribution from] 20nm [chips], we will still certainly have growth in the third and the fourth quarters.”
“We have taken into account cautious inventory management” in the supply chain, he said.
Overall, TSMC expects to expand its market share by several percentage points this year after growing 4 percentage points last year, Chang said.
Analysts yesterday also voiced concern that TSMC would lose 16nm or 14nm chip orders to rivals for Apple and Qualcomm Inc orders because TSMC is expected to lag behind them in ramping up production of 16nm chips. TSMC plans to mass produce 16nm chips in the third quarter of next year.
TSMC will initially take a smaller market share than its rivals in 16nm technology next year, but it will regain its lead in 2016, given its chip’s better performance and lower power consumption compared with those developed by rivals such as Samsung Electronics Co, Chang said.