Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said that weaker-than-expected demand for smartphones in emerging markets and China would curtail customer demand for its chips and restrain its growth.
The world’s largest contract chipmaker said its second-quarter profit growth slowed to 33 percent year-on-year as sales fell for the second consecutive quarter.
It now expects third quarter revenue to only grow by between 0.76 percent and 2.22 percent — to between NT$207 billion and NT$210 billion (US$6.61 billion and US$6.71 billion)— compared with last quarter’s NT$205.44 billion.
Photo: Liao Chen-huei, Taipei Times
TSMC also revised downward its revenue growth forecast for the global semiconductor industry this year — for the second time — from the 4 percent annual increase it forecasted three months ago to 3 percent.
Foundry segment revenue would expand by 6 percent annually this year, down from the previous forecast of 10 percent, it said.
However, TSMC, which makes smartphone chips for Qualcomm Inc and Apple Inc, said that it would outgrow its peers by sticking to its goal of growing revenue by about 10 percent annually this year.
It attributed its optimism to a recovery of demand in the second half of the year, supported by launches of new iPhone and Android smartphones as well as a pickup in demand from emerging markets.
The revenue growth this year would also come from its market share gains in advanced 16 nanometer (nm), 20nm and 28nm chips, TSMC chairman Morris Chang (張忠謀) said at a news conference in Taipei.
“The third-quarter guidance is slightly lower than our expectations,” Deutsche Bank semiconductor analyst Michael Chou (周立中) said. “If currencies in emerging markets continue to depreciate against the US dollar, it will have an adverse impact on mobile phone demand.”
However, Chou said he is positive about TSMC, given its fast progress in developing next-generation technologies.
“TSMC expects its 16nm [chip] market share next year will be higher than this year, surpassing its rivals,” Chou said. “Besides, TSMC is very likely to start delivering 10nm chips in the first quarter of 2017, which will be faster than rival Intel. This will be the first time TSMC outpaced its US rival in ramping up advanced technologies.”
Intel Corp has postponed its 10nm chip shipments, originally expected in the middle of next year, to the second half of 2017.
TSMC expects to start qualification of its next-generation 7nm technology in the first quarter of 2017, just five quarters after the qualification of its 10nm, Chou said.
“This is a structural improvement,” he said.
TSMC yesterday kept its capital spending budget for this year unchanged at between US$10.5 billion and US$11 billion, leaving its capital spending to revenue ratio down about 40 percent from 50 percent over the past three years.
It also released its second-quarter results, saying net income reaching the second-highest level in the company’s history thanks to hefty share disposal gains.
Net income rose 0.5 percent to NT$79.42 billion during the quarter that ended on June 30, compared with NT$78.99 billion in the previous quarter, according to the company’s financial statement.
TSMC booked a one-time gain of NT$17.6 billion by selling shares in semiconductor equipment maker ASML Holding NV, contributing earnings of NT$0.6 per share last quarter.
“During the second quarter, demand for smartphones became weaker than we expected,” TSMC co-chief executive officer Mark Liu (劉德音) told investors. “This weaker demand is due to a stronger US dollar against emerging countries’ currencies and partly due to economic uncertainty.”
Chang said supply chain inventory might return to seasonal levels by the end of next quarter, rather than at the end of last year as the company originally thought.
Inventory surplus reached its highest level since the last industry slump — during the global financial meltdown in 2008 and 2009 — at the end of last quarter, TSMC said.
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