As we highlighted in our insight post last quarter, TSMC is an important semiconductor company to track to understand the underlying growth trends in technology space especially communications.
TSMC the world’s largest semiconductor foundry announced its Q4 2014 results and the results were phenomenal.
Some of the performance highlights during the quarter for TSMC were:
- Revenues jumped an impressive 56% annually to cross US$7 Billion with gross margins around 49%, a record operating margin around 40%. TSMC ended the year with almost US$ 24 Billion in revenues.
- The communications applications business now contributes to a record 65% of the total TSMC revenues.up from 39% level since the first Apple iPhone traction in 2008
- The strong wafer demand for mobile related applications at TSMC points to a robust smartphone chips sell-in orders from its customers for the Western holiday season and upcoming Chinese New Year season
- Also, global migration from 2G to 3G and 3Gto 4G as well as industry leading efficient 20nm process tech is helping TSMC to expand revenues in mobile applications space
- In contrast, the computers fell from a 34% level high revenue contribution to a mere single digit 9% contribution in Q4 2014, highlighting shift in focus towards communications plus limited growth in this segment
- From wafer process technology perspective, the 20nm process tech straightaway contributed to 21% of the total revenues in just two quarters of introduction and 28nm now contributing to 30% of the revenues (down from 34% in Q3)
- In total, the advanced wafer applications now contribute to more than half of the TSMC’s total revenues. This is great news for TSMC as it is rapidly reaching a comfortable level of scale for the new nodes
- North American customers accounted for almost three-fourth’s of TSMC’s revenues during the quarter
- We estimate this signals a big Apple quarter, the major customer of TSMC for its latest 20nm A8 SOC. Apple is now squeezing in almost 2 billion transistors of A8 in less space than a billion transistors in its previous generation A7 chip
- It would be interesting to see on Apple’s and Qualcomm’s strategy to further diversify its orders (for 16nm FinFet) beyond TSMC to Samsung (14nm FinFet) in coming months and see if it affects TSMC’s revenues in long run. Both TSMC and Samsung have their work cut out to retain vs attract Apple & Qualcomm. Samsung’s partnership with Global Foundries has helped Samsung raise its profile in terms of process technology and capacity
- The next quarter while would be a slight dip in terms of overall customer demand but we estimate TSMC might hold revenues and margins flat sequentially but up annually