SAN FRANCISCO — Taiwan Semiconductor Manufacturing Co. (TSMC) showed a solid 10.9% growth in revenue in the fourth quarter, which ended December 2013, compared to the same quarter a year ago. The company's fourth quarter net income and diluted earnings per share both increased by 7.7%.
The foundry giant attributed its fourth quarter growth to the accelerated demand for mobile devices -- late in the year -- and the company's improved margins. TSMC said that gross margin for the quarter was 44.5%, operating margin was 32.8%, and net profit margin was 30.7%.
TSMC, however, isn't optimistic about the coming quarter.
Lora Ho, senior vice president and chief financial officer of TSMC, noted in a statement that the company expects its first quarter revenue to decline sequentially by about 6%. It's due to "IC companies' weak seasonal demand and the continuing inventory reductions by the fabless companies," she added.
Double digit decline
The continued demand for mobile computing devices in the fourth quarter, however, appears to have masked what was going on in the rest of the application segments.
During the earnings call, Ho said, "Our demand for computer, consumer, and industrial-related products all declined by double digits." She added "inventory correction in the IT supply chain affected overall demand for TSMC's wafer." As a result, communication became the sole growth segment for TSMC, with its revenue contribution increasing from 49% in the third quarter to 54% in the fourth quarter.
Undoubtedly sluggish personal computer sales are affecting many vendors in the semiconductor industry -- including Intel Corp. Earlier this week, Intel said it has delayed opening a factory in Chandler, Ariz.,that was originally planned to start producing chips made from the most advanced 14 nanometer process.
Revenue by technology
Looking at TSMC's revenue by technology, Ho stressed the company's customers' strong demand for 28-nanometer technology. The revenue contribution from 28-nm node "jumped from 13% in the prior quarter to 22% in the fourth quarter," she said.
During the call, TSMC's chairman and CEO Morris Chang added that the company's production of 28-nanometer wafers in 2013 will "triple that of 2012."
As for high-k, Chang explained that the company has four different types: three are high-k metal gate, and the earliest type the company introduced was the oxynitride. He acknowledged that the majority of the high-k production last year was the oxynitride. However, he said that the more advanced version high-k metal gate will surpass oxynitride in the third quarter this year.
TSMC expects the capital expenditures for 2014 to be between US$9.5 billion and US$10 billion.
During the earnings call, Chang said that 88% of capital spending will be "for 28-nanometer, 20-nanometer, 16-nanometer, and building facility equipment."
As for facilities and equipment, Chang said that 5% will be spent for R&D equipment, which will be needed to develop advanced technology 10-nanometers and beyond.
Two percent of the company's capital spending is for specialty technology equipment, necessary for power, embedded flash, micro controller, imaging, and others. Chang added that TSMC bought last year "a piece of land in Zhunan," which he described as 15 or 20 minutes of driving away from TSMC's headquarters.
According to a Reuters' report, TSMC had "the third-largest capital spending in the chip industry last year, trailing Samsung Electronics, which spent around $22 billion, and Intel which spent around $11 billion."