July 16, 2014 / 6:15 AM / 4 years ago

UPDATE 2-Taiwan's TSMC sees record revenue this year on smartphone demand

* Revenue to hit record in Q3, grow at least 20 pct this year

* Q2 net T$59.7 bln vs T$56.5 bln analyst view

* New Apple phone release to drive growth -analysts (Adds forecasts, executive comments, context)

By Michael Gold

TAIPEI, July 16 (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chip manufacturer, expects revenue to grow at least a record 20 percent this year thanks to increased demand from smartphone makers like Apple Inc.

TSMC is already on track for a bumper year after reporting its highest quarterly profit since the end of 2006, thanks to handsets being packed with chip-hungry features such as the latest mobile data technology.

The company is now poised for a burst in sales of chips for the widely anticipated successor to the iPhone 5 from Apple - a company KGI Securities analyst Michael Liu said accounts for a “high single digit” percentage of TSMC’s total revenue.

“The third quarter will be another record-breaking quarter in revenue, operating income and net income,” Chairman Morris Chang said at a meeting with analysts on Wednesday after the company announced second-quarter earnings.

Revenue is likely to land in a range of T$206 billion ($6.87 billion) to T$209 billion in July-September, and will be even higher in the fourth quarter, Chang said without elaborating.

Revenue reached a record T$183 billion in the second quarter. That yielded a 15.3 percent on-year rise in net profit at T$59.7 billion, beating a T$56.5 billion mean estimate of 21 analysts polled by Reuters.

Ahead of the announcement, shares of TSMC closed 1.9 percent lower versus a 0.9 percent decline in the broader TAIEX index .


TSMC’s record forecast further clouds the outlook for a semiconductor industry enjoying strong sales of mobile chips yet poor demand for personal computers.

Rival Intel Corp said a recovery in PC sales should push third-quarter revenue beyond analyst estimates. Yet ASML Holding NV, which produces tools for chip makers, expects full-year sales to come in below expectations.

TSMC’s outlook involves increasing its market share among dedicated chip makers because a particularly high proportion of its output meets certain quality standards, Chang said.

“We will increase our overall foundry market share by several percentage points this year,” Chang said, and “at least” maintain that share next year.

TSMC held 58.7 percent of the foundry market last year, followed by GlobalFoundries Inc with 11.8 percent, according to researcher IDC.

Increased custom from Apple is the primary reason for TSMC’s bullish outlook, according to market watchers.

The U.S. technology company recently hired TSMC to make the majority of chips for its next-generation phones instead of choosing Samsung Electronics Co Ltd, industry insiders say.

Samsung competes with TSMC and has counted Apple among its semiconductor customers, analysts say. But Samsung also competes with Apple as a producer of smartphones.

“If a competitor (of TSMC) is a competitor to (its own) customer, that’s its weakness,” Chang said.

$1 = 29.9780 Taiwan Dollars Editing by Christopher Cushing

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