Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it was cutting its capital expenditure budget this year by US$1 billion because of disappointing demand for smartphone chips this quarter.
The manufacturer of chips, including for Apple Inc’s iPhone 6, said it plans to spend US$11 billion on advanced technology development this year, down from its previous estimate of US$12 billion.
The revised figure is still higher than Intel Corp’s budget of US$8.7 billion, after the US chip manufacturer cut its proposed capital expenditure by US$1.3 billion on Tuesday.
Photo: Liao Chen-huei, Taipei Times
Hsinchu-based TSMC attributed the cutback to several factors, including boosting capital efficiency, clients’ faster migration to more advanced 16-nanometer (nm) chips from 20nm chips, and slackening demand.
The size of the cut was larger than Credit Suisse analyst Randy Abrams’ estimates of a reduction of “several hundred million [US] dollars.”
That implies Qualcomm Inc — one of TSMC’s biggest customers — lost some orders, as Samsung Electronics Co starts using its own chips in its Galaxy smartphones, Abrams said.
“We expect the impact will be only in 2015,” Abrams said.
TSMC also trimmed its revenue forecast for the global semiconductor industry this year, predicting annual growth of 4 percent from an earlier estimate of 5 percent.
The company also lowered its growth estimates for global foundry revenues to 10 percent from its prior forecast of 12 percent.
Despite a challenging environment, “we will work to achieve double-digit percentage [revenue] growth this year,” TSMC co-chief executive officer Mark Liu (劉德音) said.
Revenue for this quarter is expected to contract by between 6.77 percent and 8 percent to between NT$204 billion and NT$207 billion (US$6.53 billion and US$6.62 billion), compared with NT$222.03 billion last quarter, because inventory correction on the clients’ side could affect demand, Liu said.
“Some of our customers appeared to have been too optimistic about their business outlook, resulting in higher-than-expected inventory levels,” Liu said.
“Some of our mobile customers have recently cut back deliveries because demand did not meet their expectations,” he said.
Lower demand — mostly for handset chips — would lower the chipmaker’s 0.28nm capacity utilization rate to about 80 percent this quarter, co-chief executive Wei Che-chia (魏哲家) said.
As a result, 20nm chips — mostly used for high-end smartphones — would only contribute about 15 percent to the company’s overall revenue this year, down from its previous forecast of 20 percent, Wei said.
However, TSMC expects the slowdown to be short-lived, with growth momentum gathering steam in the second half of the year, as customer demand recovers after inventories return to normal levels at the end of this quarter and new 16nm chips start to contribute to its revenue stream.
The company also reported that net profit surged 65 percent from a year earlier to NT$78.99 billion (US$2.53 billion) last quarter, but declined 1.2 percent from a record profit of NT$79.99 billion the previous quarter.
Commenting on the water shortage problem, TSMC said it would use water trucks to transport water for its factories in Tainan after the government further tightened water restrictions on Wednesday.
The company said that water rationing had not affected its manufacturing operations.
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Catastrophic computer outages caused by a software update from one company have once again exposed the dangers of global technological dependence on a handful of players, experts said on Friday. A flawed update sent out by the little-known security firm CrowdStrike Holdings Inc brought airlines, TV stations and myriad other aspects of daily life to a standstill. The outages affected companies or individuals that use CrowdStrike on the Microsoft Inc’s Windows platform. When they applied the update, the incompatible software crashed computers into a frozen state known as the “blue screen of death.” “Today CrowdStrike has become a household name, but not in