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April 18, 2013 10:40 am
Strong sales of smartphones and tablets, notably in China, boosted profits at TSMC and helped the Taiwanese contract chipmaker shake off the fall in PC sales that has hit other major chip producers, notably Intel, the US group.
The company beat expectations with net profits of T$39.6bn ($1.3bn) for the first quarter of 2013 and raised its forecast for revenue growth in the three months to June to around 17 per cent quarter-on-quarter.
“We attribute our strength to, first, mobile-related applications,” said Morris Chang, chief executive.
He said the higher forecast for revenue growth for the current next quarter was because of continued demand for mobile phones – and in particular, remarkably strong demand from Chinese consumers for devices of the kind that run on TSMC-made chips.
“Pleasantly, I found myself to be too pessimistic” in making earlier forecasts, he said. “The China piece is playing a pretty important factor in my pleasant surprise.”
The results come a few days after slumping PC demand drove Intel, the world’s biggest chipmaker, to report weaker-than-expected results for its first quarter. Sales fell 7 per cent and margins fell as the company mothballed some manufacturing operators in anticipation of further soft demand.
At TSMC, demand for chips used in communication devices are now 55 per cent of sales, up from 51 per cent at the end of last year.
Yet the swift growth in mobile devices, and the demand for smaller chips that are high-performance but consume less battery life, has also pushed TCMS and rival producers to invest ever more heavily in new facilities and research.
Mr Chang said the company was raising its budget for capital spending this year to $9.5bn-10bn, up from an earlier budget of $9bn.
TSMC commands nearly half of the chip foundry market, which excludes chips made for in-house products, as at Samsung Electronics of South Korea and Intel. But competition is rising.
GlobalFoundries, a fast-growing foundry owned by an Abu Dhabi sovereign wealth fund, recently broke into the market for a type of mobile chip design in which TSMC once had a near-monopoly. GlobalFoundries also recently raised its spending plan for this year and will now invest over $4bn, its chief executive told the Financial Times last month.
Meanwhile, Intel, which is struggling to compensate for falling demand for its PC chips, could start trying to eat into TSMC’s market share. So might Samsung.
TSMC and other foundries produce chips designed by chip designers, notably Qualcomm and MediaTek of the US, that lack their own factories. Intel and Samsung are integrated chip companies that do both manufacturing and design.
Designer Altera, a long-time TSMC customer, recently tapped Intel to produce leading-edge chips with 14 nanometres between transistors. TSMC executives “thoroughly critiqued” themselves after Altera made that decision, said Mr Chang.
But he said the bigger challenge came from Intel’s push into designing mobile chips as it tried to move away from its reliance on PCs. This could take market share from TSMC’s customers, such as Qualcomm, that now lead the mobile market.
TSMC’s revenue of T$132.8bn ($4.4bn) was slightly up from last quarter and above its forecast of T$127bn-129bn. The predicted quarter-on-quarter growth of 17 per cent for the second quarter would come with particularly fast growth in the mobile segment, said Lora Ho, chief financial officer.
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