TSMC makes conservative outlook for 2015
Taiwan Semiconductor Manufacturing Co. (TSMC) has revealed that the outlook for the rest of this year is worse than the company previously expected because customers are digesting an inventory build-up that built up earlier this year.
"Inventory is being depleted more slowly than we expected," said TSMC chair Morris Chang, making a rare appearance today at the company's announcement of results for 2Q15. "The slow decrease in inventory is not a good omen for Q4. We do believe that by Q4, inventory will be back to the seasonal level."
Demand for TSMC's communications chips that go into Apple iPhones and other handsets, which account for the largest segment of the company's overall revenue, will decline in Q3 this year. Demand in computer, consumer and industrial segments will rise during the same period, according to TSMC. For the time being, the company will maintain its capital expenditure budget for this year within a range of $10.5 billion and $11 billion.
TSMC chair Morris Chang
TSMC is carefully evaluating capex plans as it forecasts slowing industry growth in coming years. During the rest of this decade, the overall growth rate for the global semiconductor industry is likely to fall in a range of 4-6 per cent while TSMC exceeds that level by a few per centage points, the company said. Global semiconductor revenue growth reached a peak at 9.2 per cent in 2014, according to market research firm IHS Technology. TSMC said it still expects its 2015 sales to achieve "double digit" growth compared with last year. Three months ago, the company said annual sales growth would be about 10 per cent. The inventory problem has been more pronounced among fabless companies, according to Randy Abrams, an analyst with Credit Suisse in Taipei. Chip design companies such as Qualcomm and MediaTek are among the main foundry customers for TSMC.
"The biggest problem was fabless. It will take a couple of quarters to bring inventory down," Abrams stated. The handset business has been slower than TSMC expected earlier this year, he added.
Over the longer term, Chang said he didn't foresee any material impact on TSMC's foundry business from the recent wave of mergers and acquisitions sweeping through the semiconductor industry. In particular, industry observers have predicted that Intel's acquisition of Altera, announced earlier this year, would hurt TSMC's sales. Altera has been one of TSMC's largest customers.
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