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May 26, 2017

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TSMC Q2 net profit hits record high

TAIPEI--Taiwan Semiconductor Manufacturing Co. (TSMC,台積電), the world's largest contract chip-maker, said its net profit for the second quarter of this year hit an all-time high, with analysts attributing the growth to an increase in demand for high-end technology.

In the April-June period, TSMC posted NT$59.70 billion (US$1.99 billion) in net profit, up 24.7 percent from a quarter earlier and up 15.2 percent from a year earlier.

Its second quarter earnings per share (EPS) stood at NT$2.3, compared with the NT$1.85 in EPS recorded in the first quarter and the NT$2.00 seen in the same period of last year.

In the three-month period, the chip-maker posted NT$183.02 billion in consolidated sales, a quarterly high and an increase of 23.5 percent from a quarter earlier and 17.4 percent from a year earlier.

TSMC's gross margin stood at 49.8 percent, up from 47.5 percent quarter-on-quarter, and its operating margin rose to 38.6 percent from last quarter's 35.4 percent.

The strong results reflected rising demand for a wide range of communications, computers, consumer electronics and industrial electronics, which gave a boost to TSMC's high-end technology, analysts said.

Chips made on the advanced 28 nanometer (nm) process accounted for 37 percent of TSMC's total sales over the quarter, up from 34 percent in the previous three-month period, while chips made on the 40/45nm process made up 19 percent of total sales, down from 21 percent.

Sub-20nm Process Big Mover

TSMC Chairman Morris Chang (張忠謀) told an investor conference that the 28nm process drove TSMC's growth over the past three years, while the more advanced 20nm and 16nm technology is expected to be the major growth driver over the next three.

TSMC kicked off production on the 20nm process in January and will start 16nm production early next year.

Chang said he expects chips made on the 20nm process to account for 10 percent of TSMC's total sales in the third quarter and more than 20 percent in the fourth quarter.

He added that for 2015, 20nm production could make up over 20 percent of total revenue.

Chang said the market for 4G LTE communications technology has created strong demand for chips made on the 28nm and 20nm processes, which could help TSMC post another fresh high in sales and profits for the third quarter.

Lora Ho (何麗梅), TSMC's chief financial officer, said third quarter consolidated sales could range between NT$206 billion and NT$209 billion, representing a quarterly increase of 12.6-14.2 percent.

Ho said TSMC is expected to see its gross margin grow to 48.5-50.5 percent in the current quarter, with its operating margin ranging between 38.5 percent and 40.5 percent.

Meanwhile, TSMC is gearing up to develop the even more sophisticated 10nm process, according to Chang.

He said that related research and development is expected to cost 7.3 percent of total sales for 2014.

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