TSMC Ships More 28nm Wafers than Expected, Projects Rapid Ramp

TSMC Revenue Drops as Market Demand Softens

by Anton Shilov
01/19/2012 | 08:48 PM

Taiwan Semiconductor Manufacturing Company said this week that the ramp up of chip production using 28nm process technology will be fast and the technology will contribute to 10% of TSMCs wafer revenue already in the second half of 2012. Although sales in the Q4 2011 were lower than expected, the world's largest contract maker of semiconductors believes that chips made using advanced nodes will continue to be in demand.

28nm to Ramp Up Rapidly

 

"Our 28nm entered volume production last year and contributed 2% of Q4 2011's wafer revenue. Defect density and progress is ahead of schedule and is better than 40/45nm at the corresponding stage of the ramp-up. We expect 28nm ramp this year to be fast and we expect 28nm will contribute more than 10% of total wafer revenue this year," said Morris Chang, chief executive officer and chairman of TSMC.

TSMC has so far completed 36 individual tape-outs and have scheduled another 132 individual product tape-outs in this year. At present the company produces chips using 28LP (SiON), 28HP (HKMG) and 28HPL (HKMG) versions of the process. The 28HPM flavour entered risk production this quarter and the manufacturer expects to start volume manufacturing of chips using 28HPM in the second half of 2012. At present the majority of 28nm chips made by TSMC are produced using 28nm LP process technology that relies on silicon oxynitride, but by the end of the year TSMC expects 50% of its 28nm chips to rely on more advanced high-K metal gate (HKMG) technology. In Q1 2012 TSMC expects wafers processed using 28nm process technologies to account for 5% of revenue.

TSMC's Capacities Continue to Grow

In Q4 2011, 55nm/65nm process technology accounted for 30% of total wafer revenues, 40nm was 27%, and 28nm accounted for 2%. These advanced technologies accounted for 59% of total wafer revenues. TSMC said that loads of its clients are looking forward migrating from 65nm node straight onto 28nm node in order to receive maximum advantage in performance and costs.

 

Total managed capacity of TSMC declined slightly to 3417 thousand 200mm equivalent wafers in Q4 2011, as a result of capacity conversion in 300mm fabs and annual maintenance in certain 200mm fabs. TSMC managed capacity in Q1 2012 is expected to increase by 5.1% sequentially to 3592 thousand 200mm equivalent wafers, mostly attributed to an 8.5% increase in 300mm wafer capacity.

Total managed capacity in 2011 increased 17% sequentially to 13221 thousand 200mm equivalent wafers, compared with 11329 thousand 200mm equivalent wafers in 2010. 300mm wafer capacity increased 29% in 2011.

Slow Demand Hurts Revenues

TSMC's consolidated revenue in Q4 2011 was NT$104.71 billion ($3.498 billion), net income was NT$31.58 billion ($1.054 billion), and diluted earnings per share was NT$1.22 ($0.20 per ADR unit). Year-over-year, fourth quarter revenue decreased 4.9% while both net income and diluted EPS decreased 22.5%. Compared to third quarter of 2011, fourth quarter of 2011 results represent a 1.7% decrease in revenue, and a 3.9% increase in both net income and diluted EPS.

In U.S. dollars, fourth quarter revenue decreased 5.4% from the previous quarter and decreased 4.5% year-over-year.Gross margin for the quarter was 44.7%, operating margin was 31.4%, and net margin was 30.2%.

“Although the outlook of the global economy remains uncertain, we expect the demand for our wafers to be stronger than seasonal for the first quarter,” said Lora Ho, chief financial officer of TSMC.

Based on TSMC's current business outlook and exchange rate assumption of $1 to NT$30.25, management expects revenue is expected to be between NT$103 billion and NT$105 billion; gross profit margin between 42.5% and 44.5%; Operating profit margin between 28.5% and 30.5%. TSMC further expects the capital expenditures for 2012 to be about $6 billion.