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Apple may account for 20% of TSMC sales in 2 years

TAIPEI -- Mobile chips used in Apple Inc. products may account for 20 percent of the sales of Taiwan Semiconductor Manufacturing Co. (TSMC) in the next two years, according to a Barclays PLC research note.

That would be a significant increase from the less than 5 percent share of the world's largest chip maker's sales contributed by Apple in the first quarter of 2014, the British bank said in the research note dated April 11.

Andrew Lu, an Asia-Pacific semiconductor analyst at Barclays, said the new chips TSMC makes for Apple could include potential A8 and A9 application processors, as well as integrated circuits designed for fingerprint sensors and the rumored “iWatch” wearable device.

TSMC could also benefit from a technology shift to the advanced 64-bit ARM-based chips for smartphones and micro servers, which could contribute “incremental growth” to TSMC's sales in the next few years, he said.

As a result, Lu gave TSMC shares an “overweight” rating and revised his target price to NT$160 (US$5.3) from NT$139. He also raised his estimates for TSMC's earnings per share for 2014 by 7 percent to NT$8.92 and for 2015 by 4 percent to NT$9.54.

TSMC shares closed up 0.42 percent at NT$120.5 Monday in Taipei trading.

In the first three months of 2014, TSMC reported higher-than-expected consolidated sales of NT$148.22 billion on rising demand for chips using the advanced 28-nanometer process.

Market analysts said TSMC's latest sales data showed that the company has not been affected much by the traditional slowness seen in the integrated circuit industry in the first quarter.

TSMC is scheduled to release its first quarter results and give its second quarter sales guidance at an investor conference on April 17.

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