Moody’s hands TSMC ‘A1’ rating

By Lisa Wang  /  Staff reporter

Sat, Mar 16, 2013 - Page 14

The world’s top contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), yesterday received an “A1” rating from Moody’s Investor Services because of the strength of its technology in the fast-growing application processors market for smartphones.

That put TSMC in the same position as its competitors Intel Corp and Samsung Electronics Co, which also obtained “A1” ratings from Moody’s.

“The company derives over 50 percent of its revenue from manufacturing integrated circuit logic chipsets for mobile application processors and 15 percent to 20 percent from computing products. It therefore benefits from the fast upgrade cycles for smartphones and tablets,” Moody’s vice president and senior analyst Lina Choi said in a statement.

In addition, TSMC has overtaken its peers by between 15 percent and 20 percent in terms of profitability over the past few years, the statement said.

Moody’s assigned a “stable” outlook for TSMC’s rating, but said the “A1” rating was constrained by the industry’s intensive capital investment and the cyclical nature of the business.

TSMC’s cash flow has drifted into the red for a second straight year last year as a result of heavy capital expenditure. The company plans to spend a record US$9 billion this year on new facilities and equipment.

As Intel and Samsung have both entered the foundry business, the rating agency said it was concerned about intensifying competition and it expects competition will accelerate in the next three to five years.

TSMC will have to defend its market position against both Intel and Samsung, which are much larger companies and likely to have more resources than the Taiwanese firm, Moody’s said.

However, TSMC would see limited threat in the next one to two years, given its manufacturing capabilities, experience in managing a large diversity of customers and its long-term customer relationships, Moody’s said.