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TSMC says demand for mobile devices boosted its Q4 revenue

20 Jan 2014

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Taiwan Semiconductor Manufacturing Co. (TSMC) reported a 10.9 per cent growth in revenue in the fourth quarter, which ended December 2013, compared to the same quarter a year ago. The company's Q4 net income and diluted earnings per share both increased by 7.7 per cent. The company says the growth can be attributed to the increase in demand for mobile devices late in the year and its improved margins. TSMC said the gross margin for the quarter was 44.5 per cent, operating margin was 32.8 per cent, and net profit margin was 30.7 per cent.

TSMC, however, isn't optimistic about the coming quarter.

Lora Ho, senior vice president and chief financial officer of TSMC, noted in a statement that the company expects its first quarter revenue to decline sequentially by about 6 per cent. It's due to "IC companies' weak seasonal demand and the continuing inventory reductions by the fabless companies," she added.

The continued demand for mobile computing devices in the fourth quarter, however, appears to have masked what was going on in the rest of the application segments.

During the earnings call, Ho said, "Our demand for computer, consumer, and industrial-related products all declined by double digits." She added that "inventory correction in the IT supply chain affected overall demand for TSMC's wafer." As a result, communication became the sole growth segment for TSMC, with its revenue contribution increasing from 49 per cent in the third quarter to 54 per cent in the fourth quarter.

Undoubtedly sluggish personal computer sales are affecting many vendors in the semiconductor industry—including Intel. Earlier this week, Intel said it has delayed opening a factory in Chandler, Ariz., that was originally planned to start producing chips made from the most advanced 14nm process.

Looking at TSMC's revenue by technology, Ho stressed the company's customers' strong demand for 28nm technology. The revenue contribution from 28-nm node "jumped from 13 per cent in the prior quarter to 22 per cent in the fourth quarter," she said.

During the call, TSMC's chairman and CEO Morris Chang added that the company's production of 28nm wafers in 2013 will "triple that of 2012."

As for high-k, Chang explained that the company has four different types: three are high-k metal gate, and the earliest type the company introduced was the oxynitride. He acknowledged that the majority of the high-k production last year was the oxynitride. However, he said that the more advanced version high-k metal gate will surpass oxynitride in the third quarter this year.

TSMC expects the capital expenditures for 2014 to be between $9.5 billion and $10 billion.

During the earnings call, Chang said that 88 per cent of capital spending will be "for 28nm, 20nm, 16nm, and building facility equipment."

As for facilities and equipment, Chang said that 5 per cent will be spent for R&D equipment, which will be needed to develop advanced technology 10nms and beyond.

Two per cent of the company's capital spending is for speciality technology equipment, necessary for power, embedded flash, micro controller, imaging, and others. Chang added that TSMC bought last year "a piece of land in Zhunan," which he described as 15 or 20 minutes of driving away from TSMC's headquarters.

According to a Reuters' report, TSMC had "the third-largest capital spending in the chip industry last year, trailing Samsung Electronics, which spent around $22 billion, and Intel, which spent around $11 billion."

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