While AMD, Apple et al thrash around, chippery fat-cat TSMC is grinning all the way to the bank

But does 20nm sales slump spell trouble?


Chip-baking industry heavyweight Taiwan Semiconductor Manufacturing Company (TSMC) emerged from another quarter of gangbusters year-on-year growth on Thursday, even as it reported flat revenue from the previous sequential quarter and it warned that the next quarter might be somewhat less spectacular.

The firm – which fabs chips for such companies as AMD, Apple, Nvidia, and Qualcomm – reported revenue of US$7.04bn (£4.71bn) for the first quarter of its fiscal 2015, which ended on March 31.

Still, it was a solid 49.8 per cent gain over the previous year's quarter, continuing a trend of double-digit gains that TSMC has seen for three quarters in a row. Net income for the quarter, similarly, was US$2.5bn (£1.67bn), a 65 per cent gain from a year ago.

Chips for the communications market made up most of TSMC's income, accounting for 60 per cent of sales in the quarter. Chips for industrial applications were the next largest category at 22 per cent, with chips for consumer devices and computing rounding out the pie at 10 per cent and 8 per cent, respectively.

One cause for concern was that shipments of chips based on TSMC's 20-nanometer process – its latest technology – dipped sequentially, down from 21 per cent of total revenue in Q4 of 2014 to 16 per cent in the most recent quarter.

Although TSMC is the world's largest contract chipmaker, it's s till playing catch-up in the process game to such fabbing rivals as GlobalFoundries, Intel, and Samsung, all of which are already putting 14nm process technology into production.

In the past, TSMC has suggested that it plans to race ahead of its competitors by skipping 14nm and pouring all of its efforts into reaching 10nm first, but that may be wishful thinking.

Sales of chips based on TSMC's 28nm process remained strong, however, at 30 per cent of the total, indicating an approximately 50 per cent gain over last year's Q1.

But the Taiwanese firm's CFO Lora Ho warned in a canned statement that investors should expect expect some rough waters ahead in the second quarter, saying, "In the second quarter, a combination of customers' business loss, inventory adjustment, and a less favorable exchange rate will negatively impact our second quarter business."

What kind of bad news does that mean for TSMC? In the second quarter of 2014, the firm reported revenue of NT$183bn Taiwanese dollars. For the second quarter of 2015, on the other hand, Ho projects revenue of between NT$204bn and NT$207bn Taiwanese dollars. In other words, the chipmaker's year-on-year growth next quarter might be as low as 11.5 per cent. If only every company had such problems.

Don't worry, though, Ho said she expects favorable results in the second half of the year to make up for Q2's slump and that TSMC will finish 2015 showing full-year growth in the double digits. ®

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