Fri, Oct 14, 2016 - Page 12 News List

TSMC predicts strong quarter on smartphone demand

By Lisa Wang  /  Staff reporter

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies chips for Apple Inc’s iPhone 7 series, yesterday said this quarter would be a stronger-than-expected period, benefiting from constantly increasing demand for premium smartphones.

Bucking the downtrend in fourth quarters over the past few years, TSMC expects revenue for this quarter to drop by only 1 percent to 2 percent, or between NT$255 billion and NT$258 billion (US$8.03 billion and US$8.12 billion), compared with NT$260.41 billion last quarter.

Chips for mobile phones and other communications devices were the biggest revenue source for TSMC, accounting for 60 percent last quarter.

“High-end smartphone demand is better than we expected. The deployment of the 4G [network] in China and upgrades in emerging markets has also driven demand,” TSMC co-chief executive officer Mark Liu (劉德音) told an investors’ conference in Taipei.

As demand remains healthy, inventory reduction is expected to be “relatively mild” in the current quarter, Liu said.

Customers might see inventory increase by about two days more than the seasonal level this quarter, Liu added.

TSMC’s revenue this year is expected to increase as much as 12 percent from NT$843.5 billion last year, outpacing the industry’s 1 percent annual growth, Liu said.

Gross margins are likely to be between 50.5 and 52.5 percent during the current quarter, compared with last quarter’s 50.7 percent, the chipmaker said.

TSMC is aiming to maintain its gross margins at about 50 percent over the next five years, company chief financial officer Lora Ho (何麗梅) said.

Capital spending this year is to increase to more than US$9.5 billion, slightly lower than a previous estimate of between US$9.5 billion and US$10.5 billion, Ho said.

The company’s positive outlook came as it reported another record profit of NT$96.76 billion for last quarter, up 33.4 percent from NT$72.51 billion in the second quarter. On an annual basis, last quarter’s figure jumped 28.4 percent from NT$75.33 billion.

“TSMC’s third-quarter performance surpassed expectations as sales of iPhone 7 models were better than expected, while Samsung Electronics Co’s Note 7 recall crisis also affected performance,” Taishin Securities Investment Advisory Co’s (台新投顧) Mason Li (李鎮宇) said.

Li estimated that up to 5 million additional iPhone units will be sold in the current quarter, as Note 7 users switch to new smartphones.

“TSMC has a chance to set a record for its fourth-quarter earnings in the Note 7 aftermath,” he said.

TSMC also shared its long-term business outlook with both investors and analysts.

Liu said high-performing computing devices, including data centers and virtual reality gadgets, would replace mobile phones as the biggest revenue growth driver in 2019.

The global high-performance computing device market is expected to reach US$15 billion in 2020, Liu said.

TSMC has viewed the automotive and the Internet of Things (IoT) sectors as its two key growth drivers in revenue over the next five years, growing at an annual compound rate of between 5 and 10 percent.

The global automotive-related chip market is likely to surge from US$4 billion last year to US$6 billion in 2020, while the worldwide IoT market is likely to triple from US$2 billion to US$6 billion during the same period, Liu said.

As for the company’s progress in developing advanced technologies, Liu said it is “well on track,” adding that the company is scheduled to ship its first batch of 10-nanometer chips in the first quarter next year.

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