Fri, Apr 17, 2015 page13

• TSMC slashes capex by US$1bn

  SHORT-TERM CORRECTION: The chipmaker expects the slowdown in demand to be short-lived, with growth recovering in the second half after inventory adjustments

  • By Lisa Wang / Staff reporter
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  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.

  

  Taiwan Semiconductor Manufacturing Co co-chief executive officers Wei Che-chia , left, and Mark Liu, right, preside over the company’s first quarter investors’ conference in Taipei yesterday.

  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.
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