Taiwan Semiconductor Is Well Positioned In FY 2015: Quarterly Earnings And Outlook A Total Blow Out
- TSM beat on top and bottom lines. Outlook was extremely promising.
- Growth looks attainable, as key partners are likely to stay for the duration of FY 2015.
- However, TSM will experience some headwinds on FCF, as a significant increase in CAPEX is highly likely.
- Despite these factors, TSM seems relatively well positioned, as growth in smartphone demand is coming from mid- to low-end devices.
- Also, IoT and wearables will contribute to TSM's growth rate.
Taiwan Semiconductor Still Dominates; Buying The Sell-Off
- Taiwan Semiconductor sold off sharply after reporting a seemingly good quarter with good guidance for the rest of 2014.
- Some current news regarding competition may have led to profit-taking following its strong stock performance the past several months.
- This article reviews where I see TSM now and reiterates the bullish view of the stock I first propounded three months ago.
- Taiwan Semiconductor will benefit from demand for low-end smartphones and China's push into 4G.
- Orders from Apple will benefit Taiwan in the long-run.
- Taiwan Semiconductor is a great buy at present valuation.
Taiwan Semiconductor Keeps Building For The Next Act
- TSMC management believes that 20nm will generate 20% of revenue exiting the year, with Apple likely close to half of that.
- Analysts, investors, and industry-watchers continue to opine on whether Intel or TSMC has the better technology at 14nm/16nm, but both are likely to be viable and competitive processes.
- If TSMC can reduce capex spending back to about 30% of sales (or less), the shares are undervalued today.
The Market Is Now In Love With Low P/E, Dividend-Paying Stocks Like This One
- Taiwan Semiconductor Manufacturing Company’s growth is being supported by strong demand for smartphones and tablets.
- The stock trades at a reasonable multiple despite its strong growth characteristics.
- The company is based in Taiwan - best positioning it to benefit from China’s ramp up to 4G LTE.
- Lower valuation stocks, semis and international names are all working in the current market environment.
Intel And Taiwan Semiconductor: A Tale Of Two Cities
- INTC's time as a growth company has come to an end with the onset of the tablet computing.
- INTC's foray into the foundry business is unlikely to succeed without significant organizational changes.
- TSMC is likely to become the #1 semiconductor company in the next 5 years.
Mega Cap Taiwan Semi Has A Beat And Raise Quarter; Why It's A Core Tech Holding
- Taiwan Semiconductor pioneered the chip foundry business and dominates the field.
- Its economies of scale give it a durable advantage (wide moat).
- The stock has quietly surged to new highs following its "beat and raise" Q1.
- The author is bullish on the stock, and explains why herein.
- TSMC will give up the impossible chase of Intel or be smothered by Intel capital spending.
- Other than for Intel, any process below 28nm is uneconomic.
- Intel will be the last company standing in the 50-year run of Moore's Law.
TSMC's Rebuttal Of Intel's Scaling Advantage Is Just Qualitative, Not Quantitative
- At its fall 2013 investor meeting, Intel suggested the company will enjoy a 35% scaling advantage over TSMC at the 14 nm node and a ~45% advantage at 10 nm.
- TSMC issued a rebuttal during a recent conference call suggesting a much smaller Intel advantage at 14 nm that disappears at 10 nm.
- TSMC stated that the need for this rebuttal was due to Intel's slide being based on outdated data.
- Presumably, this meant TSMC had more up-to-date data to share.
- However, my analysis shows that the figure TSMC showed in rebuttal was not a plot of actual data. It was just a qualitative drawing.
This Apple/Taiwan Semiconductor Rumor Smells Fishy
Intel's Manufacturing Advantage Is Bigger Than You Think
Taiwan Semiconductor: Is There A Margin Of Safety?
Yesterday, 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.
Fri, Jan. 16, 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
Thu, Jan. 15, 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
Thu, Jan. 15, 9:16 AM
Thu, Jan. 15, 8:04 AM
Wed, Jan. 14, 5:30 PM
Fri, Jan. 9, 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.
Fri, Jan. 9, 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.
Oct. 31, 2014, 11:31 AM
- Three weeks after providing a calendar Q3 warning that triggered a massive chip stock rout, Microchip (MCHP +7.3%) has provided Q4 guidance that's in-line with lowered estimates. The microcontroller vendor, which has often seen trends emerge ahead of peers, also said it saw most of its inventory correction in Q3, and expects Q4 sales to be just "slightly below typical seasonal levels."
- Chip stocks are up strongly (SOXX +4%) on a day the Nasdaq is up 1.4%. Since Microchip's warning, a slew of analog chipmakers and microcontroller firms (e.g. Atmel, Freescale, STMicro, Intersil, Linear) have offered light Q4 guidance, and other firms have reported seeing high-end Android weakness (e.g. Synaptics, Cirrus Logic, Amkor).
- On the other hand, several mobile chipmakers (Skyworks, RF Micro, TriQuint, Silicon Motion), some of which have decent iPhone exposure, have provided strong results and/or guidance. Other chipmakers, such as Broadcom, Texas Instruments, and Xilinx, have rallied after delivering in-line guidance.
- Susquehanna's Chris Caso: "By now, we think it’s clear that the weakness MCHP saw in September is not company specific ... The question now is if the full extent of the weakness has been dialed into estimates. If it has, then this would be among the shortest and mildest downturns in many years."
- Notable gainers: SNDK +3.9%. MU +4.1%. AMAT +3.9%. TXN +4.7%. NXPI +3.9%. NVDA +3.5%. MXIM +4.7%. LLTC +5.1%. FCS +9.6%. FSL +8.8%. ADI +6.5%. TQNT +6.8%. RFMD +6.5%. ATML +5.9%. AVGO +5.1%. MRVL +4.7%. AMCC +8.9%. BRCM +3.6%. TSM +4.4%. ARMH +3.3%.
- Intel (INTC +3.5%) has recovered most of the losses it saw yesterday due to Intesil's (ISIL +3.3%) results and guidance, and related comments about a PC chip inventory correction.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Oct. 16, 2014, 11:39 AM
- In addition to slightly beating Q3 estimates, TSMC (NYSE:TSM) is guiding for Q4 revenue of NT$217B-$220B ($7.22B-$7.33B), above a $6.96B consensus.
- Strong Apple orders appear responsible for the Q4 outlook: TSMC expects chips using its cutting-edge 20nm processes to account for over 20% of Q4 wafer revenue, up from 9% in Q3.
- For now, 20nm sales are heavily tied to shipments of Apple's A8 CPU, which is used in the iPhone 6/6 Plus and is believed to be in next-gen iPad models (to be unveiled today). Bloomberg reports TSMC has also landed orders for Apple's A8X CPU, expected to go into a 12.9" iPad. On the other hand, Samsung is believed to be the supplier for the 14nm A9 CPU, expected in next year's iPhones/iPads.
- Q3 gross margin was 50.5%, at the high end of a 48.5%-50.5% guidance range. However, GM is expected to fall to 48%-50% in Q4.
- TSMC's mainstay 28nm processes made up 34% of wafer revenue, down slightly from Q2's 37%. Qualcomm, MediaTek, and other mobile processor vendors rely heavily on TSMC's 28nm offerings.
- Also: TSMC now expects its 16nm FinFET process to reach mass-production in Q2; it previously forecast Q3. The process will square off against 14nm offerings from Samsung and Globalfoundries; Apple's A9 CPU is expected to use Samsung's 14nm process.
- Q3 results, PR
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