“Progress is much better than our original plan,” TSMC co-CEO C.C. Wei said at an investor conference to announce the company’s third-quarter 2014 earnings. “Sixteen-nanometer has achieved the best technology and maturity compared to all TSMC’s previous nodes.”
The company will increase 2015 capex from the $9.6 billion slated for this year, CFO Lora Ho said at the event. TSMC is raising the stakes with Samsung, both aiming to win FinFET orders from Apple and Qualcomm for the fast-growing smartphone and tablet segments of the electronics business. TSMC’s expected 2014 capex ranks third in the chip industry after Samsung at $11.5 billion and Intel at $11 billion, according to IC Insights.
TSMC has eroded Samsung’s supplier relationship with Apple by winning a contract from Apple to make the AX8 processor for a larger iPad, Taiwan’s Digitimes reported Wednesday, Oct. 15.
Net income surges
TSMC said that its third-quarter net income rose 46.9% to NT$76.3 billion (US$2.5 billion) from NT$52 billion in the same period a year ago.
TSMC now expects to “pull in” the production schedule for 16 nm FinFET chips to the second quarter or early third quarter of 2015, Wei said.
TSMC’s 16 nm program “looks very smooth,” said Rick Hsu, an analyst with Nomura Securities, speaking after the earnings event. “It’s going to be about a quarter ahead of schedule.”
TSMC expects to have 60 tapeouts for 16 nm chips by the end of 2015, said Wei. “Strength in increasing market share will continue in 2015.”
The comments show greater optimism after TSMC chairman Morris Chang said in July that in the 16 nm FinFET space, TSMC would have a smaller market share than “a major competitor” in 2015.
Lagging Samsung by 10 percentage points in FinFET during 2015 “doesn’t matter that much” for TSMC, Nomura analyst Hsu said. “They will regain that market share faster than Morris Chang originally expected.”
Wei reiterated the company’s comments in July that TSMC will continue to expand its lead in the FinFET business for several years after 2015. “Our 16 nm design ecosystem is ready,” he said. “We believe this is the biggest ecosystem in the industry today.”
TSMC said that tests of its 16 nm chips show that processor speeds can reach up to 2.3 GHz, and power consumption can drop as low as 75 mW.
The company is preparing to shift from its cash-cow 28 nm process technology that has led the foundry industry for nearly two years, yet may be running dry as the compound annual growth rate (CAGR) for smartphones slows in the future.
The company is tweaking the 28 nm process for low power consumption to be used in new Internet of Things (IOT) devices for automobiles and other new markets.
With 16 nm “the real volume will be in 2017 and onward,” said co-CEO Mark Liu.
By the fourth quarter of 2015, 16 nm FinFET chips will account for a “high-single-digit” percentage of the company’s sales revenue, Wei said.
The company’s ramp-up of 20 nm products, which it considers part of the same node as 16 nm chips, is meeting the targeted yield and will account for more than 20% of TSMC’s revenue in 2015, increasing slightly from 20% in the fourth quarter this year.
China slowdown dismissed
The company specifically dismissed a warning from Microchip CEO Steve Sanghi earlier this month that Microchip’s revenue for its current quarter would lag its earlier forecast because of weakness in China and inventory buildups at its distributors.
“Demand in China appears normal,” said Liu. Demand for 4G phones in China “remains strong” and TSMC expects a “record-breaking” fourth quarter, he said.
The company said an inventory correction during the rest of this year will be much milder than it anticipated in July.
In response to questions about rival UMC’s announcement this month to build a 300 mm fab in China, TSMC responded that it doesn’t exclude the possibility of building its second fab in China.
Subsidies from the Chinese government to build new fabs are “a threat” to TSMC, Liu said, adding that as long as TSMC continues to provide leading technology and customer service, TSMC’s market opportunities in China will grow.
10 nm expectations
The company gave a glimpse of its roadmap leading up to the 10 nm node. TSMC is working with 10 customers on product planning and design for 10 nm chips, Liu said.
“The goal is to enable production in 2016,” he said. “Certification is complete using an ARM core. Our 10nm will achieve industry-leading speed, power, and gate density.”
TSMC will not use EUV lithography for its first 10 nm products, according to Liu, but the company is working with ASML to develop tools for the process technology.
“There is still some way to go to catch 10 nm. We’re looking for an entry point after 10 nm.”
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