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Taiwan Semi, or TSMC (TSM), the world's largest semiconductor foundry, reported July consolidated revenues of NT$47.92B (US$1.60B), an all-time record that shattered the previous monthly high set in May by nearly 10%. The M/M increase of +11.79% (+37.25% Y/Y) is well above a 10-year average of +3.37% (σ=8.62%).

However, TSMC's strength is not a rising tide that lifts all semiconductor ships; rather, it is likely driven by a small handful of companies, which we discuss below. Foundry competitor United Microelectronics (UMC) reported July revenue growth of +3.49% (+9.12% Y/Y), roughly in line with a tight 10-year seasonal average of +4.81% (σ=5.30%). And on an absolute basis, UMC's NT$9.61B (US$320.8M) is nowhere near TSMC's record-smashing result, ranking just nineteenth all-time on a monthly basis.

We believe TSMC's strength is coming largely from four customers: Qualcomm (QCOM), Broadcom (BRCM), MediaTek (2454.TW), and Nvidia (NVDA). The OEMs driving the strength at these semiconductor companies are focused on smartphones and/or tablets, and include Apple (AAPL), Samsung (OTC:SSNLF), Google (GOOG), and Microsoft (MSFT), among others.

This is not the first time we've highlighted strength at TSMC: we noted last month that TSMC's monthly results looked positive for AAPL and two of its largest silicon suppliers (and major customers of TSMC) -- QCOM and BRCM, which have significant exposure to AAPL.

We also considered NVDA, which just last week reported revenue results and guidance that beat Street expectations. While NVDA's results are being driven by Tegra-based products from GOOG with the Nexus 7 and MSFT with its Surface tablet, in addition to others, NVDA is still predominantly a PC-based company, and Tegra does not yet represent a large-enough portion to be the primary driver of TSMC's strength.

NVDA's FQ2 (July) revenues of $1.04B beat Street expectations by just $30M, and the midpoint of its FQ3 revenue guidance range of $1.15-1.25B is $110M above Street expectations of $1.09B. NVDA's traditional graphics chip business was still about two-thirds of its FQ2 revenues. The company doesn't break out the precise size of its Tegra business nor how fast it is growing, but its consumer business (which includes Tegra) was less than 20% of total revenues, up 36% Q/Q to $179.7M. If we assume that Tegra is 75% of this segment, growing again at 36% Q/Q, this would represent ~$135M in FQ2 growing to ~183M in FQ3 -- a net increase of ~$48M for the quarter.

For comparison, TSMC's M/M increase -- which represents just one month of revenue -- nets to US$168.6M. None of this takes anything away from the strength of NVDA's quarterly results and guidance; it just appears that its results can represent only a portion of the strength at TSMC.

We believe MediaTek is 5-7% of TSMC's revenues -- it posted very strong July M/M revenue growth of +19.4%, driven by Chinese smartphone demand. This nets to roughly NT$1B M/M, whereas TSMC's M/M increase is north of NT$5B. So again, like NVDA, MediaTek appears to contribute to TSMC's strength, but it doesn't account for all of the story.

TSMC's largest customers include both QCOM and BRCM, each representing a high-single-digit portion of TSMC's revenues. And among the largest customers of both QCOM and BRCM are AAPL and Samsung. QCOM reported FQ3 revenues and FQ4 results slightly below Street expectations, stating that it is still capacity-constrained for its newest 28nm chips due to demand outstripping supply. This is despite the fact that its 28nm chips are now being sourced not just at TSMC, but three other suppliers as well. Further, while the September quarter is still capacity constrained at 28nm, it sees "very strong growth" in its December quarter, with a concurrent "very large increase" in shipments of 3G/4G devices.

BRCM posted record Q2 revenues and guidance, albeit roughly in line with analyst expectations. Wireless specifically is expected to be up "significantly." Its two largest customers are AAPL and Samsung.

Of course, since our note referencing TSMC strength last month, AAPL itself has also reported, and its revenue results ($35.0B vs Street $37.2B) and guidance ($34.0B vs Street $38.0B) were far below analyst expectations. Aside from the fact that AAPL is well-known for its conservative guidance, consensus speculation is that current guidance reflects a manufacturing pause before the launch of the iPhone 5.

But two data points suggest that the iPhone 5 (and more iPads, and possibly an iPad mini) may be coming sooner than AAPL's guidance suggests: first, as we've discussed, TSMC is today manufacturing massive amounts of product -- far more than at any other time in its history, and far more than peers on a relative basis. We've pointed out some of the likely culprits: NVDA and MediaTek, as well as QCOM and BRCM (driven by AAPL).

And then there's Cirrus Logic (CRUS), which gets over 60% of its revenue from AAPL and is designed in iPhones, iPads, Macs, and iPods. CRUS' FQ1 (June) revenues of $99M were essentially in line with Street expectations of $100.9M, but its FQ2 guidance of $170-190M represents ~80% Q/Q growth at the midpoint, and crushed already strong Street expectations of $129.7M.

The supply-chain implications of TSMC's record-smashing results cannot go unnoticed. We'll look for its next report in about a month.

Source: Taiwan Semi: Huge July Due To Mobile + Specific Customers