Taiwan Semi Running Hard ... But Is The Track A Treadmill?
Stephen Simpson, CFA
Stephen Simpson, CFA
Taiwan Semiconductor: The Flaws In The Bear Case
Taiwan Semiconductor Faces Significant Risks In The Year Ahead
Paulo Santos • 30 Comments
Paulo Santos • 30 Comments
Dec. 1, 2015, 3:57 PM
- Citing reduced expectations and the potential for a 2016 industry up cycle, HSBC has upgraded TSMC (TSM +2.2%) to Buy. HSBC previously downgraded the chip foundry giant to Hold on March 26, when shares were at $23.51.
- Shares are higher on a day the Nasdaq is up 0.9%. In other news, TSMC has announced it's selling its 5.1% stake in image/fingerprint sensor packaging firm Xintec, and a stake equal to 6% of the paid-in capital of solar cell/module maker Motech Industries. TSMC will have a 12% stake in Motech following the sale.
Oct. 16, 2015, 5:13 PM
- Intel (NASDAQ:INTC) "now has a thousand people or more working to outfit a 2016 iPhone" with its XMM 7360 2G/3G/4G modem, sources tell VentureBeat. It adds Apple (NASDAQ:AAPL) may dual-source its 2016 iPhone modems via Intel and current supplier Qualcomm (NASDAQ:QCOM).
- That meshes with a March VentureBeat report stating the XMM 7360 will go into 2016 iPhones aimed at emerging markets. Though an August Northland Securities report forecast Intel will supply modems for some iPhone 6S/6S+ units, teardowns indicate Apple is solely relying on Qualcomm's MDM9635M modem.
- The MDM9635M supports 300Mbps peak download speeds, and the XMM 7360 450Mbps peak speeds. Qualcomm, whose high-end modems are generally considered to have a performance/power consumption edge, recently unveiled the X12, which supports 600Mbps peak speeds and will be integrated with its Snapdragon 820 processor.
- Also: VentureBeat reports Apple would like to eventually develop an SoC that features both an A-series app processor and a 4G modem, and which would be manufactured using Intel's 14nm process. The site also suggests Apple is interested in Intel's 10nm process (due in 2017).
- Intel would provide modem IP for the SoC in addition to manufacturing the chip. To date, Intel has paired discrete A-series processors manufactured by Samsung (OTC:SSNLF) and TSMC (NYSE:TSM) with 3rd-party modems (in recent years, Qualcomm's). Intel recently bought 3G CDMA modem assets (needed to service Verizon, Sprint, China Telecom, and certain other carriers) from Taiwan's VIA Telecom.
Oct. 15, 2015, 1:47 PM
- TSMC (TSM -1.7%) is off moderately after slightly beat Q3 EPS estimates. Revenue of NT$212.5B (+2% Y/Y) was in-line with prior guidance of NT$211B-NT$213B, above original guidance of NT$207B-NT$210B (a strong dollar helped), and already telegraphed by the company's monthly sales reports.
- Q4 revenue guidance is at NT$201B-NT$203B ($6.23B-$6.29B), down from NT$222.5B ($6.9B) a year ago. A 2-analyst Thomson First Call consensus is at $6.29B. Apple's decision to partly rely on Samsung for A9 CPU production (unlike with the A8) is weighing on near-terrm sales.
- The 2015 capex budget has been cut for the second time this year, to $8B from a prior $10.5B-$11B. A cut was generally expected, given the forecasts provided by various chip equipment makers.
- 16nm/20nm chips accounted for 21% of wafer revenue, and 28nm chips 27%. That compares with 20% for 20nm and 27% for 28nm in Q2. 16nm (still in ramping) is expected to contribute "more significantly" to Q4 sales.
- Gross margin was 48.2%, down 30 bps Q/Q and 230 bps Y/Y, but in-line with guidance of 47%-49%. Q4 GM guidance is at 47.5%-49.5%.
- Q3 results, PR
Oct. 15, 2015, 7:04 AM
- Taiwan Semiconductor Manufacturing (NYSE:TSM): Q3 EPS of $0.46 beats by $0.01.
- Revenue of NT$212.51B (+1.7% Y/Y)
Oct. 14, 2015, 5:30 PM
Oct. 9, 2015, 2:29 PM
- TSMC (TSM -1.3%) had September revenue of NT$64.51B ($1.98B), -3.8% M/M and -13.8% Y/Y. The Y/Y decline was larger than August's 3.2%, and compares with 24.7% growth in July.
- Nonetheless, Q3 revenue of NT$212.5B ($6.52B) is in-line with prior guidance of NT$211B-NT$213B. The year-ago launch of Apple's A8 CPU (exclusively manufactured by TSMC) made for tough comps - TSMC and Samsung are both supplying A9 CPUs to Apple for the iPhone 6S/6S+. A chip industry inventory correction and soft PC and Chinese smartphone demand have also weighed.
- Previously: TSMC to reportedly be the exclusive supplier of Apple's A10 CPU
Sep. 15, 2015, 9:56 AM
- Citi's Atif Malik has downgraded Amkor (AMKR -0.9%) to Neutral, and cut his target by $1.20 to $5.80. He argues the adoption of foundry giant TSMC's (NYSE:TSM) Integrated Fan Out Wafer-level Package (InFO-WLP) solution will hurt Amkor's chip assembly/testing market opportunity.
- InFO-WLP, which can be used by a variety of processor and connectivity chips, enables thinner/lighter chip packages by removing the need to mount a chip on a substrate. A recent report indicated Apple will use it with its next-gen A10 processor.
- Amkor is down 26% YTD, and trades for 10x a 2016 EPS consensus of $0.52. 2014 EPS was $0.88.
Sep. 14, 2015, 6:45 PM
- While Samsung is producing a large chunk of Apple's A9 CPUs (found in the iPhone 6S/6S+), TSMC (NYSE:TSM) will be the exclusive supplier of the iPhone 7's A10 CPU, Taiwan's Commercial Times reports.
- The A10 will reportedly enter volume production in March 2016, and (unsurprisingly) leverage TSMC's 16nm FinFET manufacturing process. The company's next-gen 10nm manufacturing process, which could allow TSMC to regain its historical process edge against Samsung/GlobalFoundries (currently at 14nm), isn't expected to reach volume production until later in the year.
- The Commercial Times also reports TSMC (via its 16nm process) has obtained half of all A9 orders. Past reports have indicated Samsung will handle a majority of a A9 output.
- Aside from A-series app processors, TSMC produces Apple's TouchID fingerprint sensors, and has been rumored to produce SSD controllers for the company. TSMC also, of course, handles manufacturing for major Apple suppliers such as Qualcomm, Broadcom, and Cirrus Logic.
Sep. 10, 2015, 3:57 AM
- Taiwan Semiconductor Manufacturing Company's (NYSE:TSM) revenues fell 3.2% on year in August to NT$67.04B ($2.06B). On month, revenues -17.2%.
- In January-August, revenues +24% to NT$575.47B. (PR)
Aug. 25, 2015, 11:29 AM
- TSMC's (TSM +4.6%) thin-film solar module manufacturing unit plans to cease operations by month's end. Exec Steve Tso: "TSMC continues to believe that solar power is an important source of green energy and that solar module manufacturing remains a robust and growing industry, but despite six years of hard work we have not found a way to make a sustainable profit."
- TSMC entered the hotly-competitive solar module market in 2011, while promising to eventually grow its production capacity to 1GW. The chip foundry now argues it entered the market too late, and that a lack of economies of scale left it at a cost disadvantage.
- First Solar (NASDAQ:FSLR) remains the top player in the thin-film module market, and is followed by Japan's Solar Frontier. TSM has rallied amid a 3.4% gain for the Nasdaq.
Aug. 10, 2015, 12:49 PM
- Perhaps aided by Apple A9 CPU orders, TSMC's (NYSE:TSM) July sales rose 35% M/M and 24.7% Y/Y in July to NT$80.95B ($2.59B). Annual growth was much improved from June's -0.6%, and also above May's 15.4%.
- TSMC is rallying on a good for equities in general, and chip stocks in particular. Near-term expectations have been low - TSMC provided cautious remarks about 2H15 chip demand with its July 16 Q2 report, and a number of major clients have provided soft calendar Q3 guidance.
Jul. 16, 2015, 12:11 PM
- TSMC (TSM -0.5%) beat Q2 EPS estimates - revenue was already known thanks to monthly sales reports - and guided for Q3 revenue of NT$207B-NT$210B ($6.62B-$6.72B), slightly above a $6.59B consensus.
- However, the foundry giant also offered cautious commentary about 2H15 demand. It cited the impact of slowing emerging markets smartphone growth, customer inventory management, and customer product transitions. The last issue is likely a reference to Apple's reported plans to use both Samsung and TSMC to produce its A9 CPU. Digitimes reports both companies have begun A9 production.
- Chairman Morris Chang: "The outlook for this year has continued to deteriorate." TSMC now expects only 3% 2015 chip industry growth, and a 6%-10% increase in global foundry demand. The company still expects double-digit 2015 sales growth, thanks in large part to 50% Q1 sales growth (driven by Apple A8 CPU orders). Consensus is for 12.1% 2015 growth.
- Q2 gross margin was 48.5%, -80bps Q/Q and -130bps Y/Y, but in-line with a 47.5%-49.5% guidance range. Q3 GM guidance is at 47%-49%. Chang insists chip industry consolidation won't affect TSMC's pricing.
- 20nm chips made up 20% of Q2 wafer revenue vs 16% in Q1, and 28nm chips 27% vs. 30%. Chang predicts revenue from TSMC's next-gen 16nm FinFET process (expected to be used for the A9) will exceed 20nm revenue in 2016.
- Q2 results, PR
Jul. 16, 2015, 7:27 AM
- Taiwan Semiconductor Manufacturing (NYSE:TSM): Q2 EPS of $0.50 beats by $0.06.
- Revenue of NT$205.44B (+12.3% Y/Y)
Jul. 15, 2015, 5:30 PM
Jul. 10, 2015, 12:00 PM
- TSMC (TSM +1.9%) had June revenue of NT$59.96B ($1.92B), -14.5% M/M and -0.6% Y/Y. By contrast, Y/Y growth was 15.4% in May, 21.7% in April, and 44.7% in March. A diminishing tailwind from Apple's A8 CPU launch played a role, as did slowing Chinese smartphone growth and Samsung's decision to use its Exynos 7420 processor in the Galaxy S6 instead of Qualcomm's Snapdragon 810 (made by TSMC).
- For the whole of Q2, TSMC had revenue of NT$205.5B ($6.57B), +8% Y/Y and below a $6.66B 3-analyst consensus. Last month, chairman Morris Chang stated TSMC is aiming for 10%+ 2015 sales growth.
- Full Q2 results arrive on July 16. Shares are higher on a day the Nasdaq is up 1.5%.
Jun. 9, 2015, 7:11 PM
- At its annual meeting, TSMC (NYSE:TSM) set a dividend of NT$4.50 per common share for its 2014 operations, up from NT$3.00 a year ago. With each ADS equal to 5 common shares, the payout is equal to NT$22.50 ($0.72) per ADS. That spells a 3.2% yield at current levels.
- Chairman Morris Chang stated the world's biggest foundry is aiming for 10%+ 2015 sales growth; an 8-analyst consensus is currently at 8.5%. He also claimed TSMC (aided by Apple A8 CPU orders) grew its global foundry share to 54% in 2014. Samsung/Globalfoundries' 14nm process ramp, and the 14nm orders reportedly secured from Apple and Qualcomm, are expected to impact TSMC's 2015 share.
- Separately, TSMC has launched partnerships with EDA software firm Cadence (NASDAQ:CDNS) and GPU core developer Imagination (OTCPK:IGNMF) to create IP that can be used by TSMC clients to develop IoT-optimized chips.
- Cadence and TSMC are showing off an IoT "IP subsystem" that relies on Cadence DSP cores and chip/sensor interfaces, and work with a 55nm low-power TSMC process. TSMC and Imagination are working on IP subsystems for both high-end and low-end sensors; they feature Imagination CPU/GPU cores, memory, and connectivity and sensor IP.
Taiwan Semiconductor Manufacturing Co., Ltd. engages in the research, development, manufacture and distribution of integrated circuit related products. It operates its businesses in two segments: foundry and other. Its foundry segment engages in the manufacturing, selling, packaging, testing and... More
Industry: Semiconductor - Integrated Circuits
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