World’s largest dedicated independent semiconductor foundry Taiwan Semiconductor Manufacturing Company (TSM, Financial) is expecting revenues loss in the second quarter. The news came in line with Qualcomm (QCOM, Financial), one of the chief clients of TSMC, losing business from Samsung (SSNLF, Financial) for the latter’s upcoming smartphone model.
Clientele
Headquartered at Hsinchu science and industrial park in Hsinchu, Taiwan, TSMC was founded in 1987 which has now expanded its business into lighting, and solar energy-related industries as well. Listed with both Taiwan Stock Exchange and New York Stock Exchange, the company’s chief business remains wafer-product lines and is best known for its logic chip product line. Some of the top techies are in their client list including Qualcomm, NVIDIA (NVDA, Financial), Advanced Micro Devices (AMD, Financial), MediaTek, Marvell (MRVL, Financial) and Broadcom (BRCM, Financial). It also caters to some of the developing and small businesses like Spreadtrum (SPRD, Financial), Applied Micro (AMCC, Financial), Allwinner Technology, Xilinx (XLNX, Financial), Altera (ALTR) and HiSilicon.
The equations
In the quarter ending June, TSMC is expecting a dip in its sales of as much as 7% to 8%. Although the yearly profits rose to 50% which was beyond expectations but this year’s first quarter revenues were also flat. Analysts believe the forecast for the fall in the second quarter has been done keeping in view the loss of business from Samsung by Qualcomm as the former is planning to design and manufacture their own chip for their upcoming smart phone model. Qualcomm is currently outsourcing majority of its business from TSMC which might wealen post the loss of the former’s client. Even further loss can be posted as Samsung might cut on direct orders from TSMC for the manufacturing of chips for Apple Inc.’s (AAPL) next phone. While iPhone 6 models were all carrying chips made by TSMC, the figure might drop 30% to 40% for the next in line iPhone.
Although monthly sales have seen a downturn since the beginning of this year, it still has better figures to show than last year. Quarter one result this year is up by 9.5% than last year due to the mergers done by the company.
Why is Semiconductors’ business getting gloomy?
As far as TSMC is concerned, the net profit was up 65% to $2.54 billion in the first quarter which was way above the analysts’ forecast of $2.50 billion. However the company agrees to the fact that declining mobile phone prices are leading the mobile manufacturing companies to opt for smaller players in semiconductors industry in the name of cost-cutting. For instance, smaller companies like Semiconductor Manufacturing International Corp. (SMI) and United Microelectronics Corp. (UMC) can offer more competitive prices for less-advanced technology. Overall, TSMC believes that the pure play chip industry is going to see a rise of 4% this year which is 1% less than the forecast and revenue growth in manufacturing alone standing at 10% which is 2% less than the forecast.
The future plan
Although TSMC’s revenues fell 33.5% from first quarter as against its estimate of 26%, the company is looking forward to gradual improvement with stabilized sales in the second half of this fiscal year. Orders are in hand from Nvidia Corp. for producing new integrated chip set –the nForce on TSMC’s 0.18 Micron processor to be shipped by August. TSMC has chalked out $1 billion to produce chips with improved efficiency in the year 2015 while it awaits orders from other smart phone companies other than Samsung for some high-end android phones.
