TSMC Rises to Record After Forecasting Sales Above Estimates

Apr 17, 2014 9:37 pm ET

April 18 (Bloomberg) -- Taiwan Semiconductor Manufacturing Co. rose to a record in Taipei after the world’s largest contract manufacturer of chips forecast sales surpassing analyst estimates amid continued growth in smartphone demand.

The stock climbed as much as 2.5 percent to NT$123 as of 9:21 a.m. in Taipei. Second-quarter revenue will be NT$180 billion ($6 billion) to NT$183 billion, the Hsinchu, Taiwan- based company said yesterday. The high-end of the range is above each of 25 analyst estimates compiled by Bloomberg which had an average of NT$169 billion.

Rising demand for wireless devices combined with an increased share of each smartphone sold globally prompted TSMC to boost its full-year industry growth target. The introduction of Long-Term Evolution technology for faster fourth-generation wireless networks is also driving orders for the silicon chips it sells to clients, it said.

“TSMC first-quarter sales and profit topped expectations,” Randy Abrams, who rates the stock outperform at Credit Suisse Group AG in Taipei wrote in a report today. “The strength was from baseband, connectivity and gaming share gains, and communications restocking.”

Of the the 35 analysts tracked by Bloomberg, 29 recommend buying the stock while the remaining six have hold ratings.

Global semiconductor industry sales will climb 7 percent this year, compared with an earlier forecast for 5 percent growth, co-Chief Executive Officer Mark Liu told investors yesterday. The made-to-order chip foundry market, of which TSMC is the largest supplier, will climb 14 percent compared with previous expectations for 10 percent growth, he said.

Wafer Demand

“Since mid-January we started to see strong orders across all segments, we now have an improved demand outlook,” Liu said yesterday. “The acceleration of LTE infrastructure build up, LTE smartphone proliferation and the increase in silicon content improves our outlook.”

Liu and co-CEO CC Wei, who took up their roles in November, yesterday predicted TSMC’s revenue growth this year will outpace that of the wider foundry market. The investor conference was the first time in five years that founder and Chairman Morris Chang didn’t attend the company’s quarterly investor conference.

TSMC got around $10.80 for every high-end smartphone sold last year and that will climb to an average $13.90 this year, Liu said.

The company reported first-quarter net income which climbed 21 percent to NT$47.9 billion beating the NT$43.4 billion average of 25 analyst estimates compiled by Bloomberg.

“Demand for TSMC’s wafer was much stronger than we had initially predicted in mid-January,” Chief Financial Officer Lora Ho said yesterday. “The strength came from customers’ better fourth quarter results which lead to a more positive outlook for the full year.”

Spending on equipment will be similar next year to this year, Ho said.

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               1Q                            2Q
               Company   Company   Analyst   Company   Analyst

               Actual    Forecast  Estimate  Forecast  Estimate
Sales NT$bln    148.2     147        141.9    180-183    169
Gross Margin%    47.5      47         46.3    47.5-49.5  47
Op Margin%       35.4      35         --      36.5-38.5    --
Sources: TSMC, Bloomberg

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