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TSMC benefiting from Samsung Galaxy S IV: brokerage

TAIPEI -- Taiwan Semiconductor Manufacturing Co. (TSMC) is likely benefiting from orders for new processors to be used in Samsung Electronics Co.'s next generation of its Galaxy smartphone, J.P. Morgan Securities said Monday.

Similar to the previous Galaxy S III, Samsung is expected to adopt multiple solutions for the application processors and baseband chips in its new Galaxy S IV, which will be unveiled in New York on March 14, J.P. Morgan said in a note to clients.

For the United States version of the S IV, Samsung will probably use Qualcomm Inc.'s Snapdragon 600 quad-core processor, which is manufactured using TSMC's 28-nanometer process technology, the brokerage said.

But the South Korean electronics giant may use its in-house 8-core processor for the S IV models in Europe, J.P. Morgan said.

“We see Samsung's vendor change to Qualcomm for its U.S. shipments as positive to the semiconductor sector,” Rick Hsu, a Taipei-based analyst at J.P. Morgan, wrote in the note.

“We believe TSMC is enjoying the extra benefits — a reason why its first-quarter revenue is guided to be stronger than seasonality,” he said.

TSMC forecast at an investor meeting in January that its first quarter sales will be between NT$127 billion and NT$129 billion, little changed from the previous quarter despite coming during the high-tech sector's slow season.

TSMC Chairman Morris Chang said the 28nm process will serve as the driving force behind the company's sales growth for 2013, with production of 28nm process chips set to triple from a year earlier.

Hsu said that along with Samsung, TSMC remains the only foundry capable of operating the 28nm process commercially, meaning that extra demand from Qualcomm may take away capacity for other customers.

As a result, he believed TSMC's revenue growth in the secondquarter will likely increase by less than 10 percent, which will be lower than the seasonal level, since the extra 28nm orders from Qualcomm will already be reflected in first quarter sales.

Hsu also expected the extra 28nm orders to benefit integrated circuit packaging and testing service providers — including Taiwan's Advanced Semiconductor Engineering Inc. (ASE) and Siliconware Precision Industries Co. (SPIL) — beginning in the second quarter.

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