SAN FRANCISCO—Fabless chip vendor Qualcomm Inc. acknowledged Wednesday (April 18) that it was turning to other foundry suppliers amid a shortage of 28-nm capacity at its longtime foundry partner, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).
Qualcomm executives discussed the 28-nm capacity shortage in a conference call with analysts after reporting sales and profit for its fiscal second quarter that exceeded analysts' expectations. But Qualcomm executives acknowledged that the 28-nm capacity situation may adversely impact its numbers in the next two quarters.
Paul Jacobs, Qualcomm's chairman and CEO, said the company was seeing very strong demand for its Snapdragon S4 applications processor and other 28-nm products, but that 28-nm capacity is constrained.
"Although the manufacturing yields are progressing per expectation, there's a shortage of 28-nanometer capacity," Jacobs said. He added that Qualcomm could not secure enough 28-nm capacity to meet the increasing demand for its 28-nm parts and that the constraints to supply are expected to limit Qualcomm's revenue potential this year.
Jacobs acknowledged that Qualcomm was engaging with "several alternative sources" for 28-nm capacity. Jacobs did not identify the alternative sources, but possibilities would presumably include Globalfoundries Inc., United Microelectronics Corp. and Samsung Electronics Co. Ltd. Jacobs said Qualcomm would increase its operating expenses to facilitate additional 28-nm supply.
Jacobs said Qualcomm would also continue to use TSMC as a foundry for 28-nm devices.
"We're working closely with our partners to bring additional capacity online," said Jacobs. He said Qualcomm doesn't expect to see a significant improvement in 28-nm capacity until the final calendar quarter of this year.
Taiwanese IT publication Digitimes said in a report Tuesday that Qualcomm and another stalwart TSMC customer, Nvidia Corp., approached other foundries about producing 28-nm chips for them because of tight 28-nm capacity at TSMC. The report cited unnamed sources at semiconductor tool makers.
Though Qualcomm left its sales guidance for the fiscal year unchanged, executives acknowledged that the 28-nm capacity shortage would have a negative impact on its outlooks for Qualcomm's fiscal third and fourth quarters.
Qualcomm (San Diego) reported sales of $4.94 billion for the quarter ended March 25, up 6 percent from the previous quarter and up 28 percent compared to the year-ago quarter. The company reported a net income of $2.33 billion, up 59 percent from the previous quarter and up 117 percent from the year ago quarter.
On a pro forma basis, excluding charges and special items, Qualcomm reported a net income of $1.76 billion, up 5 percent from the previous quarter and up 21 percent from the year-ago quarter. The company reported pro forma earnings per share of $1.01, up 4 percent sequentially and up 17 percent year-to-year.
Qualcomm's results for the quarter exceeded consensus analysts' expectations, which called for sales of $4.84 billion and pro forma earnings per share of 96 cents, according to Yahoo Finance.
For the current quarter, which closes in June, Qualcomm said it expects sales to decline to between $4.45 billion and $4.85 billion, which would represent a sequential decline of 2 percent to 10 percent. The range would represent an increase of 23 to 34 percent compared to the year-ago quarter.
The low end of Qualcomm's outlook for the current quarter came in below consensus analysts' expectations, which called for $4.8 billion, according to Yahoo Finance.
For the fiscal year 2012, which closes late this year, Qualcomm continues to project sales of $18.7 billion to $19.7 billion, an increase of 25 to 32 percent from fiscal 2011. The company increased its estimates for pro forma earnings per share for the fiscal year of $3.61 and $3.76, which would be up 13 to 18 percent from fiscal 2011.
Better get those 28-nm capacity, if you're going to hit revenue goals. I wonder what's the reason for the shortage? High in demand?
Member of the Patexia Semiconductor Group (http://bit.ly/HeyQJO)
An interesting point for this discussion: AMD paid dearly for the right to have 28-nm products manufactured at other foundries, yet 28-nm capacity is constrained. I assume that before AMD took that step they made sure they could get the capacity they needed.