Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) will continue to outperform in the semiconductor industry as it moves to extend its services into back-end processes, brokerage CLSA said yesterday.
This came a day after the world’s largest contract chipmaker unveiled the world’s first heterogeneous 3D IC test vehicle, which it jointly developed with Altera Corp, a US-based programmable logic solutions provider.
TSMC’s chip-on-wafer-on-substrate (CoWoS) process provides 3D chip manufacturers like Altera with a thorough solution from front-end wafer production to back-end IC assembly and testing, the Hsinchu-based company said.
“By developing CoWoS technology, TSMC intends to offer ‘one-stop-shopping’ services for its clients, providing mid- and back-end processes to simplify the supply chain and shorten time to market,” CLSA analyst Bruce Lu said in a research note.
CLSA forecasts that CoWoS will drive the expansion of TSMC’s addressable market by US$2 billion to US$4 billion in 2015, including incremental revenue from wafer and additional mid and back-end processes, such as bumping, packaging and testing.
As the cost savings generated by the new technology are more significant for larger dies, field programmable gate-array designers like Xilinx Inc and Altera would adopt CoWoS first, followed by graphics processor unit vendors such as Nvidia Corp and AMD Inc, the brokerage said.
“Most customers are likely to prefer leveraging various outsourced semiconductor assembly and testing firms in order to offset TSMC’s pricing power,” Lu said.
Nonetheless, Lu expects to see some shifts in the value chain and industry consolidation, which will benefit leading foundries and integrated device manufacturers such as TSMC and Samsung Electronics Co.
Given its track record of execution and innovation, TSMC will continue outperforming the semiconductor industry, with operating margin and return on equity remaining above 30 percent and 20 percent respectively, CLSA said.
It maintained an “outperform” rating on TSMC and raised its target price to NT$91.50, from NT$85.45.
Shares of TSMC closed up 0.23 percent at NT$85.40 in Taipei yesterday.
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