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TSMC targets record revenue as high-end smartphones demand more chips

A man sits in front of the logo of Taiwan Semiconductor Manufacturing Co Ltd (TSMC) during an investors' conference in Taipei April 18, 2013
A man sits in front of the logo of Taiwan Semiconductor Manufacturing Co Ltd (TSMC) during an investors' conference in Taipei April 18, 2013

TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (TSMC) targets record revenue in the second quarter as more of the company's chips are installed in high-end smartphones to power increasingly complex features.

The world's largest contract chip producer also aims to grab market share from rivals such as Samsung Electronics Co Ltd and Intel Corp on demand from phone makers, whose custom pushed first-quarter earnings up by a fifth.

Smartphone sales grew 36 percent in the fourth quarter, showed the latest data from researcher Gartner, with low-end phones in emerging markets constituting the centre of growth while sales of high-end phones in advanced economies slow.

Yet high-end phones equipped with Long-Term Evolution (LTE) wireless technology will drive TSMC's revenue several percentage points beyond the overall industry, as will phones with advanced features such as image and fingerprint sensors which require more chips, said co-Chief Executive Mark Liu on Thursday.

"Demand in smartphones appears healthier than we expected last quarter," Liu said at an earnings briefing for analysts alongside fellow CEO C.C. Wei.

TSMC reported its eighth straight quarter of profit growth in January-March at T$47.9 billion ($1.59 billion), compared with the T$43.2 billion mean estimate of 19 analysts polled by Thomson Reuters.

The company previously reported first-quarter revenue of T$148.22 billion, 11.7 percent more than a year earlier, and 7.3 percent more than forecast in January.

"We enjoyed strong orders across all segments," Liu said at the briefing.

TSMC projected second-quarter revenue in a range of T$180 billion to T$183 billion. The company declined to disclose its current or targeted market share for high-end smartphone chips.

Shares of TSMC have risen about 15 percent since the start of the year versus 2.8 percent in the Taiwan SE Weighted Index. They closed 0.8 percent lower ahead of the earnings release, compared with a 0.2 percent rise in the benchmark.

CONSISTENT PROFIT

Asia's 10th biggest company by market value has been able to consistently profit thanks to the spread of smartphones such as those from Apple Inc, industry watchers say, as well as its ability to produce a high degree of defect-free chips.

The company recorded an operating margin of 35.4 percent in the first quarter and projected its second-quarter margin to be in the range of 36.5 percent to 38.5 percent.

Chief financial officer Lora Ho also confirmed TSMC's forecast of double-digit profit growth this year as its world-first 20-nanometre chip-making technology begins to supplant the 28-nanometre standard.

The technology, which entered production in the first quarter, allows for increased power and efficiency by packing more transistors onto each chip. Intel plans to introduce 14-nanometre technology in the second half of this year.

"Our 20 nanometer ramp-up is one of the largest mobilizations in semiconductor history," said co-CEO Wei.

TSMC promises further efficiency - and wider margins - with larger 18-inch silicon wafers, which will allow for more chips per wafer. The company declined to provide a timetable for production because of a lack of mature equipment from suppliers.

($1 = 30.1440 Taiwan Dollars)

(Editing by Christopher Cushing)

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