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Chip maker TSMC first-quarter net profit up 6.8%

TAIPEI, Taiwan -- Taiwan Semiconductor Manufacturing Co. (TSMC,台積電), the world's largest contract chip maker, has posted a sequential 6.8-percent increase in net profit for the first quarter of this year on the back of solid demand for chips made using its high-end technology process.

In the three-month period, TSMC's net profit totaled NT$47.87 billion (US$1.59 billion), compared with NT$44.81 billion recorded a quarter earlier. The first-quarter net profit was also up 21.0 percent from a year earlier, according to the chip maker.

Q1 Sales Result Beats Earlier Estimate

Its earnings per share for the January-March period stood at NT$1.85, up from NT$1.73 registered in the previous quarter and also higher than NT$1.53 recorded for the same period of last year.

In the three-month period, TSMC's consolidated sales rose 1.7 percent from a quarter earlier to NT$148.22 billion, beating an earlier estimate of NT$147 billion.

“In the first quarter, we saw much stronger demand for our wafers across all segments, but it was more pronounced in mobile-related applications than we initially predicted in January,” TSMC's chief financial officer and senior vice president, Lora Ho (何麗梅), said in a statement.

In the quarter, sales of chips used in communication devices rose 8 percent from a quarter earlier, and sales of chips used in computers and industrial devices gained 2 percent, while sales of chips used in consumer electronics fell 14 percent.

Chips made on TSMC's advanced 28 nanometer process accounted for 34 percent of its total sales in the first quarter, unchanged from the fourth quarter of last year, while chips produced on the 40/45nm process made up 21 percent of the total sales, up from 17 percent seen in the previous quarter.

In the first quarter, TSMC's gross margin hit 47.5 percent, higher than an earlier estimate of 47 percent, while its operating margin reached 35.4 percent, also beating a prediction of 35 percent.

Q2 Sales Expected to Grow over 20%

“Driven by better-than-expected 4Q 2013 business, IC companies have turned more positive on their 2014 outlook,” Ho said. As a result, TSMC expects its second-quarter consolidated sales to range between NT$180 billion and NT$183 billion, up 21.5-23.5 percent from the first quarter.

The chipmaker said the second-quarter gross margin is expected to grow to 47.5-49.5 percent and its operating margin is likely to range between 36.5 percent and 38.5 percent.

TSMC President and co-CEO Mark Liu (劉德音) said the semiconductor industry will continue to benefit from solid global demand for smartphones and rising needs for facilities relating to 4G telecom services development.

Liu said TSMC has raised the sales growth target of the global IC market to 7 percent in 2014 from its previous estimate of a 5 percent rise, while upgrading the sales growth goal of the IC design sector to 9 percent from 8 percent and hiking the sales growth estimate of the foundry business to 14 percent from 10 percent.

Liu said, however, that as TSMC's expected strong sales growth in the second quarter will boost that quarter's comparison base, he expects the chipmaker's growth in the third quarter to be moderate.

TSMC said that its capital expenditure for 2014 is expected to reach about US$10 billion and that its capex for 2015 could stay little changed from this year. The company said it will continue to invest in 20nm and 16nm process development in 2015.

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Taiwan Semiconductor Manufacturing Co. (TSMC,台積電) C-suite executives preside at the company's quarterly investors' conference without the supervision of TSMC Chairman Morris Chang (張忠謀) in Taipei, yesterday. (CNA)

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