Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday again raised its capital spending to cope with stronger-than-expected mobile phone demand.
The company plans to spend between US$9.5 billion and US$10.5 billion this year, up about 5 percent from April’s estimate of between US$9 billion and US$10 billion.
The capital spending increase will be “mainly for 10-nanometer [nm] and 7nm [technologies],” TSMC chief financial officer Lora Ho (何麗梅) told investors. “We see a stronger mobile [chip] demand than we expected. We need to build more capacity next year.”
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TSMC plans to ramp up production of 10nm technology in the first quarter next year and 7nm in 2018.
The company expects to grab more than a 70 percent share of the 10nm segment worldwide next year, Ho said.
“Apple Inc and Mediatek Inc (聯發科) will be early adopters [of TSMC’s 10nm technology] in the first half of 2017,” BNP Paribas SA analyst Laura Chen (陳佳儀) said in a report on Wednesday.
“We believe TSMC will sustain its leading position globally in 10nm and 7nm and onward,” Chen said.
TSMC co-chief executive officer Mark Liu (劉德音) yesterday predicted that the company’s revenue would expand at a compound annual growth rate of between 5 and 10 percent in the next five years, outpacing expected growth in the global semiconductor industry of 2 or 3 percent.
The company said the smartphone segment would be one of its major growth drivers going forward, despite smartphone growth having slowed over the past six quarters, Liu said.
Liu said he expects TSMC’s smartphone chip revenue contribution to move higher than the current 55 percent in the next five years.
For this quarter, TSMC expects revenue to increase by as much as 15.86 percent to NT$257 billion (US$8.01 billion) from last quarter’s NT$221.81 billion.
Ho attributed the growth to customers’ new product launches and persistent inventory buildup, primarily for Android-based phones.
Gross margin is expected to stand at between 50 and 52 percent this quarter, compared with last quarter’s 51.5 percent, while operating margin could be between 39.5 percent and 41.5 percent, following last quarter’s 41.2 percent, Ho said.
In the April-to-June quarter, TSMC reported a record profit of NT$72.51 billion, up 11.9 percent from NT$64.76 billion in the previous quarter and beating Daiwa Capital Markets’ estimate of NT$68.42 billion and NT$66.3 billion predicted by BNP Paribas.
However, last quarter’s profit fell 8.7 percent year-on-year.
Earnings per share were NT$2.8 in the second quarter, compared with NT$2.5 in the first quarter and NT$3.06 in the same period last year.
In the second quarter, chips made using 16nm or 20nm technology accounted for 23 percent of TSMC’s total revenue, while chips made using 28nm technology made up 28 percent, the company said.
TSMC shares were unchanged at NT$168.5 yesterday.
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