TSMC’s 2015 Forecast May Be Warning for Supply Chain

AIPEI — A forecast of 2015 revenue yesterday by Taiwan Semiconductor Manufacturing Co., (TSMC), may have sounded a warning for other companies in the electronics supply chain.
The world’s largest foundry said yesterday in a press statement that it “expects its full-year revenue growth rate will still be close to double digits” compared with its sales in 2014. The announcement marks the third time this year that the company has pared expectations for 2015.
“We find 2015 revenue will be NT$840.5 billion ($25.5 billion), 10.2% over 2014, barely meeting the double-digit target,” said Bernstein analyst Mark Li, in a Sept. 23 report following the TSMC announcement. In January this year, TSMC said its sales revenue in 2015 would likely rise by "several percentage points" more than the estimated industry average of 12%.
The dimmed forecast may indicate difficulty for other companies in the supply chain, according to some analysts.
“According to our industry surveys, we assume all of Taiwan’s main foundries, including United Microelectronics Corp. (UMC) and Vanguard International, would deliver a below-consensus fourth-quarter outlook to further impact the backend companies as well as downstream supply chain.,” said Fubon Research analyst Carlos Peng, in a Sept. 23 report. “We project UMCˇs fourth quarter 2015 revenue will drop more than (that of ) TSMC and Vanguard.”
TSMC may need to trim its capital expansion plans for this year and in 2016, according to Maybank Kim Eng analyst Warren Lau. For the first time ever, TSMC in January led the semiconductor industry with a capex budget for 2015 of US$11.5-12.0 billion, an increase of 11.5-20.0% compared with 2014.
Inventory correctionWeaker-than-expected demand for smartphones and the chips inside has caused an inventory correction that’s impacting TSMC and UMC, the world’s largest foundries. The current inventory digestion may end in the fourth quarter this year, but a recovery in 2016 may not materialize as demand remains uncertain, according to Maybank’s Warren Lau, in a report sent out yesterday.
Other analysts were more optimistic. TSMC is likely to see 10% revenue growth this year and next, according to HSBC analyst Steven Pelayo, in a report yesterday.
Still others said longer-term problems may weigh on TSMC.
“Our structural concerns on TSMC persist,” Bernstein analyst Li said. “Moore’s Law is challenged with mounting cost barriers. The slowing smartphone growth also challenges TSMC’s target of 10% compound annual growth rate (CAGR) in revenue and net profits in the next five years. Competitive pressure from Samsung will stay elevated, in 14nm, 10nm and beyond.”
TSMC’s loss of business from Qualcomm to Samsung earlier this year may be offset by an increase of orders from Apple to TSMC as the foundry ramps up its 16nm FinFET manufacturing during the fourth quarter, according to three analysts surveyed by EE Times.
TSMC’s trimmed expectations cap off a strong run for the company in 2014, when TSMC recorded record profit figures.

http://www.eetimes.com/document.asp?doc_id=1327798