Taiwan Semi Running Hard ... But Is The Track A Treadmill?
Stephen Simpson, CFA
Stephen Simpson, CFA
Feb. 10, 2015, 1:46 PM
- With Apple A8 CPU demand and orders from various Apple suppliers still providing a lift, TSMC's (NYSE:TSM) January sales rose 25.3% M/M and 69.4% Y/Y to NT87.1B ($2.76B) - Y/Y growth accelerated from December's 39.9%, and the 52.6% seen for the whole of Q4.
- Also: TSMC says it plans to invest more than NT$500B ($16B) at a manufacturing site in the Taiwanese city of Taichung. An upcoming expansion of a 300mm (12") wafer fab at the site is expected to create 5K jobs.
- The chip foundry giant recently set a 2015 capex budget of $11B-$12B, and plans to begin mass-production of chips using its 16nm FinFET (3D transistor) process in Q3. Its 10nm process, through which TSMC hopes to regain a manufacturing process lead Samsung and Globalfoundries are set to obtain this year through their 14nm process, is expected to enter mass-production late 2016 or early 2017.
- Shares are less than $1 away from their 52-week high of $24.49.
Feb. 9, 2015, 5:29 PM
- While Qualcomm's (NASDAQ:QCOM) Chinese settlement calls for a 5% royalty rate on multimode 3G/4G devices and a 3.5% rate on other 4G hardware (for "3G and 4G essential Chinese patents"), the rates will be derived from a royalty base of 65% of a device's net selling price.
- Qualcomm's royalty rates are typically derived from an OEM's full sales price. Apple, whose royalty payments are based on the hardware price charged to the company by its contract manufacturers, is a notable exception.
- Existing Chinese licensees will have "an opportunity to elect to take the new [license] terms for sales of branded devices for use in China as of January 1, 2015."
- As part of the settlement, Qualcomm has agreed to expand its existing partnership with Chinese foundry SMIC (NYSE:SMI). Qualcomm struck a deal with SMIC last summer covering the production of 28nm Snapdragon processors.
- TSMC (NYSE:TSM), Qualcomm's primary foundry partner for many years, could see its sales to Qualcomm for older processors (where TSMC's manufacturing process lead relative to SMIC doesn't factor) affected by the SMIC provision.
- QCOM now +3% AH. TSM -0.5%
Jan. 26, 2015, 2:56 AM
- According to sources in the semiconductor industry, Samsung Electronics (OTC:SSNLF) will be the main supplier of processors powering Apple’s (NASDAQ:AAPL) next handset model, Maeil Business Newspaper reports.
- The newspaper did not say how much the contract is worth, but Samsung will likely supply 75% of the chip production for the iPhone 7.
- Samsung was the company behind the A7 that powered the iPhone 5S, although it was ditched in favor of TSMC (NYSE:TSM) for the iPhone 6 and iPhone 6 Plus.
Jan. 16, 2015, 7:17 PM
- A day after some industry names outperformed modestly following news TSMC (NYSE:TSM) set a high 2015 capex budget of $11.5B-$12B, chip equipment makers generally traded in-line with a rising tech sector after another one of their big-3 customers, Intel, set a conservative 2015 capex budget of $9.5B-$10.5B.
- TSMC's 2015 budget is well above a 2014 capex level of $9.52B; the world's biggest foundry is both trying to keep up with rising mobile chip orders, and investing heavily to roll out its 16nm FinFET/FinFET+ processes to counter Samsung and Globalfoundries' 14nm FinFET rollouts.
- The midpoint of Intel's 2015 budget is slightly below 2014 spending of $10.1B, which itself was below prior guidance of $10.5B-$11.5B. It's also below 2011-2013 spending of $10.7B-$11B.
- Some cautiousness from Intel might have been expected: Gartner recently forecast industry capex would rise just 0.8% this year to $65.8B, albeit with wafer fab spend rising a healthier 6.7% to $33.7B. Gartner forecast memory capex would rise 13.5% and foundry capex 4.8%, but predicted logic capex (much of it from Intel) would decline 5.3%.
- Also: TSMC has disclosed it sold the 21M-share stake it took in ASML in 2012 for $1.5B, booking a $660M profit along the way. TSMC, Intel, and Samsung each invested in ASML with the goal of accelerating its EUV lithography R&D efforts (viewed as necessary to maintain Moore's Law long-term).
- Between them, Intel, TSMC, and Samsung account for over half of industry capex.
- Chip equipment firms: AMAT, KLAC, LRCX, TER, KLIC, ACLS, UTEK, RTEC, MTSN, ATE, XCRA, OTCPK:TOELF
Jan. 15, 2015, 12:16 PM
- In addition to beating Q4 EPS estimates, TSMC (NYSE:TSM) has guided for Q1 revenue of NT$221B-NT$224B ($6.94B-$7.04B), above a $6.71B consensus.
- Also: Co-CEO Mark Liu says 2015 revenue growth will likely be "several percentage points" above an estimated industry average of 12%; that would put it well above an 11.2% consensus. Growth in U.S. dollars could be slightly lower, given the U.S. dollar's strength against its Taiwanese counterpart.
- As expected, strong orders for Apple's 20nm A8 CPU provided a big lift to Q4 sales: 20nm production made up 21% of wafer revenue, up from 9% in Q3. 28nm fell to 30% from 34%.
- Gross margin was 49.7%, -80 bps Q/Q but +520 bps Y/Y and near the high end of a 48%-50% guidance range. GM in seasonally weak Q1 is expected to be in a 48.5%-50.5% range. Op. margin is expected to be in a 38.5%-40.5% range, after coming in at 39.6% in Q4.
- With TSMC investing heavily in its 16nm FinFET and FinFET+ processes, as well as making 10nm investments ahead of an expected 2016 launch, the 2015 capex budget has been set at $11.5B-$12B, well above 2014 spending of $9.52B. In October, the world's biggest foundry only said 2015 capex would top $10B.
- Chairman Morris Chang admits TSMC will lose some orders to Samsung this year, as the latter rolls out its 14nm FinFET process. But this has been widely expected.
- Q4 results, PR
Jan. 15, 2015, 9:16 AM
Jan. 15, 2015, 8:04 AM
- Taiwan Semiconductor Manufacturing (NYSE:TSM): Q4 EPS of $0.50 beats by $0.01.
- Revenue of NT$222.52T (+52.6% Y/Y)
- Shares +4.7% PM.
Jan. 14, 2015, 5:30 PM
Jan. 9, 2015, 2:42 PM
- The odds of TSMC (TSM -3.1%) losing share with top customer Qualcomm and #3 customer Apple to Samsung have grown, writes Susquehanna's Mehdi Hosseini, citing checks regarding Samsung's 14nm manufacturing process rollout. He maintains a negative rating on TSMC.
- There have been reports going back to July stating Apple/Qualcomm plan to use Samsung and Globalfoundries' jointly-developed 14nm process. Apple is widely expected to rely on Samsung for at least a part of its A9 CPU production, after tapping TSMC to manufacture the A8. Samsung began producing 14nm chips for an unnamed client (possibly Apple) last month.
- TSMC, for its part, plans to begin mass-producing 16nm chips in Q2. Its 16nm FinFET Plus process (more advanced than standard 16nm FinFET, has seen stronger customer uptake) entered risk production in November. TSMC claims a 16nm FinFET SoC consume less than half as much power as a similar SoC using its 20nm process.
Jan. 9, 2015, 2:26 PM
- With domestic economies slowing, the key theme is to find countries and stocks within those countries most exposed to external demand, says the Goldman team.
- Taiwan is the "most concentrated export story," they say, and also happens to be well-insulated from a rising rate environment in the U.S.
- Taiwan ETFs: EWT, FTW, QTWN; and there's also the FTSE Emerging Markets ETF (NYSEARCA:VWO) - which has Taiwan Semiconductor (NYSE:TSM) as a top holding.
- India and Turkey are two of the "prime beneficiaries" of lower oil prices, says Goldman, looking for continued improvement in their current account balances. The two countries' markets may also benefit from domestic rate cuts.
- India ETFs: EPI, INDY, SCIF, PIN, INDL, INP, INXX, INDA, SCIN, SMIN, INCO
- Turkey ETFs: TUR
Dec. 31, 2014, 3:31 PM
- Digitimes reports TSMC (TSM -0.2%) has advised chipmakers to "place wafer orders in advance so that they can secure a steady supply during the peak season and meet demand in time." Many clients, particularly "second-tier and smaller firms" worried about getting left out as TSMC services bigger peers, are said to have done just that.
- Sources note advance orders could help TSMC fill capacity during its seasonal downturn. The company has already seen utilization rates drop for (older) 8" fabs due to to mobile chip seasonality.
- Digitimes' report meshes with recent sales figures pointing to huge orders for Apple's A8 CPU and various other iPhone-related parts. Debate continues to swirl about TSMC's future order share (relative to Samsung) for Apple's A9 CPU.
Dec. 11, 2014, 1:54 PM
- Thanks to Apple's huge A8 CPU orders, TSMC (TSM +0.6%) had November revenue of $2.32B, -10.5% M/M (seasonality) but +64.1% Y/Y. October sales were up 55.9% Y/Y.
- Sources tell Digitimes sales are also expected to fall M/M in December, but add TSMC is still set to hit Q4 revenue guidance of NT$117B-$120B ($3.74B-$3.84B).
- Meanwhile, Samsung (OTC:SSNLF) has begun producing chips using its next-gen 14nm FinFET process for an unnamed client (quite possibly Apple), a little earlier than expected. The process is expected to be used to make Apple's A9 CPU (going into 2015 iDevices), as well as upcoming Qualcomm processors.
- TSMC might also be responsible for some A9 output, via its 16nm FinFET process (set to enter mass-production in Q2 2015).
Nov. 26, 2014, 6:25 PM
- Though Samsung "has taken the majority of Apple's iPhone chip orders for 2015," TSMC (NYSE:TSM) is believed to have landed all of the iPad-related orders for Apple's next-gen A9 processor, and is set to receive a combined 40%-50% of iPhone/iPad A9 orders, Digitimes reports.
- In December, TSMC will reportedly begin taping out A9 processors that leverage its next-gen 16nm FinFET manufacturing process. Samsung, however, is said to have won orders by offering aggressive prices for its 14nm FinFET process (previous). TSMC expects to begin 16nm mass-production in Q2 2015.
- The Korea Times reported last week Samsung will handle 80% of A-series processor output starting in 2016. TSMC is currently manufacturing the A8, and has received a huge top-line boost from doing so.
Nov. 21, 2014, 5:47 PM
- Qualcomm (NASDAQ:QCOM) has sold its Taiwanese Mirasol display plant to TSMC (NYSE:TSM) for $85M, per a TSMC regulatory filing.
- Taiwanese media previously reported Qualcomm was set to sell the plant, which it once planned to invest up to $975M in, and that TSMC wanted to use it to expands its chip assembly/testing ops.
- Meanwhile, the sell-side has been busy debating Qualcomm's analyst day guidance and commentary, with much of the attention on focused on the company's China remarks. Cowen's Tim Arcuri is somewhat encouraged. "The company provided no new substantive regulatory (NDRC/FTC/EU) updates, but seemed to strike a more definitive tone about ultimately collecting royalties on 'substantially all LTE devices.'"
- That, in turn, makes Arcuri think the most likely outcome for the China dispute is "some combination of a fine, potential changes in the royalty rate structure for all of [Qualcomm's] licensees operating in China, and/or increased investment in the local China semiconductor supply chain."
- Bernstein's Stacy Rasgon is less positive. "We do not believe the near-term regulatory issues (particularly China) are truly the primary issue anymore ... The bigger issue being how the rise of China, at scale, is changing the overarching market dynamics that Qualcomm plays."
Nov. 17, 2014, 5:27 PM
- BMO's Keith Bachman reports seeing improved U.S. iPhone 6 (NASDAQ:AAPL) supplies. "Whereas the iPhone 6 Plus was very hard to find a few weeks ago, supply has improved ... Whereas Apple stores were sold out of virtually all iPhone 6 models a few weeks ago, retail stores now appear to have almost half of the iPhone 6 models across the various carriers available for walk-in."
- Bachman does note there's still "virtually no available stock of iPhone 6 at carrier partner stores, such as AT&T and Verizon." However, online wait times at carrier stores have fallen in half to ~10 days.
- Apple's U.S. site typically shows wait times of 7-10 days for the iPhone 6, and 3-4 weeks for the 6 Plus. In October, there were multiple reports stating Apple is boosting 6 Plus production.
- Apple has added UnionPay, China's dominant payment-processor, as an App Store payment option. UnionPay credit/debit card holders will be able to link their cards with their Apple IDs, something Internet software/services chief Eddy Cue calls "one of the most requested features from [Apple's] customers in China." Quartz notes the agreement could pave the way for an Apple Pay deal.
- The Korea Times reports Samsung (OTC:SSNLF) will supply 80% of Apple's A-series app processors starting in 2016, thanks to a new agreement.
- While TSMC (NYSE:TSM) is manufacturing Apple's 20nm A8 processors, Samsung has been expected to supply a large portion (if not all) of Apple's A9 processors, leveraging a 14nm FinFET (3D transistor) process it's developing with Globalfoundries.
Nov. 10, 2014, 3:55 PM
- Taiwan's Economic Daily News reports Qualcomm (QCOM +0.1%) is set to sell a plant in Longtan, Taiwan to top foundry partner TSMC (TSM +2%) for "several billion [Taiwanese] dollars." One U.S. dollar is equal to 30.59 Taiwanese dollars.
- Back in 2011, Qualcomm announced plans to invest up to $975M to build a plant in Longtan to manufacture Mirasol color e-ink displays. But the following year, the company declared it was ending Mirasol production due to manufacturing challenges. TSMC reportedly wants to use the plant to expand its chip packaging/testing ops.
- Separately, TSMC has reported its October sales: With the help of strong Apple A8 CPU orders, revenue rose 7.9% M/M and 55.9% Y/Y to NT$80.74B ($2.64B). The company previously forecast total Q4 sales of NT$217B-$220B, good for 4%-5% Q/Q growth.
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