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  • marsavian marsavian Jan 18, 2013 7:12 AM Flag

    TSMC'S Q4 CC Transcript

    For those who like to take an interest in how the foundry boys are getting on ;-)

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    • The turtle (INTC) will absolutely win the race. Nice Dividend to wait.

    • Morris Chang

      Good afternoon, ladies and gentlemen. I’ll make a few comments on last year’s achievements, on this year as a whole, and specifically on first quarter. And I will also comment on 28-nanometer technology and on 20-nanometer and the 16 FinFET, and then finally on CapEx, this year’s CapEx.

      Lora has already reported the financials of last year to you. Basically, last year was a year of achievements for us. Revenue grew 18% to reach $17.1 and EPS grew 24% to reach TWD 6.41 per share.

      28-nanometer technology was a resounding success. The production in 2012 increased more than 30-fold, 30-fold over 2011. And we have enjoyed throughout the year, in spite of a lot of attempt to the competition, we enjoyed throughout the year close to 100% foundry market share in 28-nanometer technology.

      We have also, in the year 2012, further strengthened our R&D. Our R&D expenditure increased from TWD 33.8 billion in 2011 to TWD 40.4 billion in 2012. Our R&D people increased from 3,400 at the end of 2011 to 3,900 at the end of 2012.

      Now, a few words on 2013 and the first quarter of 2013. For the full year 2013, we are forecasting a global GDP growth of 2.6%, which is a bit higher than last year’s global GDP growth for 2.4%, now we’re forecasting 2.6% for next year – I’m sorry, this year.

      We are forecasting a world FTE market growth of 3%, we are forecasting a fabless company growth of 9%. We are forecasting a foundry industry growth of 7%, and we are forecasting a TSMC revenue growth much higher than 7%. So those are our forecast for the full year 2013.

      For first quarter 2013, I have some comments on supply chain inventory to make. Three months ago, in the last investors conference in October, we expected the supply chain inventory to decline from seven days above seasonal in fourth quarter to one day below seasonal in the first quarter. That was our expectation 12 months ago that the supply chain inventory will decline from seven days above seasonal in fourth quarter to one day below seasonal in the first quarter, all together an eight days decline.

      Now, because many mobile product manufacturers have accelerated their new product launch this year, and so late in the year they have now pulled ahead to earlier in the year. And therefore, they need IC supplies, IC inventories earlier.

      So, in – supply chain inventory now is forecast to decline only slightly from fourth quarter to first quarter. And so seven days above normal to one day below normal, we are now forecasting that the inventory will decline from six days above seasonal – well you know, in sort of seven days. Three months ago we thought the inventory was going to be seven days above seasonal. Now, we have better information and we think it’s six days above seasonal in the fourth quarter. So, the big change is that we are forecasting it to decline to only four days above seasonal in the first quarter, which is only a two-day equivalent, two-day decline, instead of the eight-day decline that we had forecast three months ago.

      Orders resulted in a higher first quarter than we thought three months ago. So now we expect the first quarter revenue to decline while in three months ago, we expected to decline. The first quarter revenue we expected to decline from the fourth quarter. We now expect the first quarter revenue to be essentially flat in U.S. dollars from the fourth quarter. Essentially flat from the fourth quarter in U.S. dollars.

      A few more words on 28-nanometer technology. After accomplishing a 30-fold increase in production, 28-nanometer capacity and output continued to ramp up aggressively this year. Production of 28-nanometer wafers in 2013 will triple that of 2012, adding the newcomers may ask we have customers. The old customers, I think, know us well enough not to ask that, if we have customers.

      High-k metal gate will surpass oxynitride. That’s in the 28-nanometer. We have, as you know, actually four types. Three of those are high-k metal gate, and the earliest type that we introduced was the oxynitride, and indeed last year, the majority of the production was the oxynitride. But the more advanced version high-k metal gate will surpass oxynitride in the third quarter this year. And in the fourth quarter, it will even surpass oxynitride even more.

      Gross margin percentage of 28-nanometer in 1Q ‘13, which is this quarter, will be slightly higher than corporate average, and is expected to remain so in 2013. This linear dragging the corporate average down more than pulling it up.

      Now, a few words on 20-nanometer and 16 FinFET. Both technologies are in progress in R&D. Both represent state of the art, leading-edge technology not just in foundry but in the whole SC industry.

      And enough discussions have taken place with enough customers with large requirements to lead us to believe that in both its first and second year of production, in both the first and second year production of 20 SoC and that first year will be next year, 2014. The second year will be a year after that, 2015. In both those years of 20 SoC production, the volume of 20 SoC will be larger than 28-nanometer in its first and second year of production, which were last year and this year. That’s a long sentence, but let me repeat it. In slides it didn’t work. We think that our volume of 20 SoC next year, 2014, will be greater than the volume of 28-nanometer last year and we think the volume of 20 SoC in 2015 will be greater than the volume of 28-nanometer this year.

      Our CapEx plan is, therefore, in accordance that belief ....

      • 1 Reply to marsavian
      • Sooo the process comparison looks like this assuming everybody executes and just listing the majority volume process for leading products each year ...

        2013 2014 2015 2016 2017
        Intel Core 22nm 14nm 14nm 10nm 10nm
        Intel SoC 32nm 22nm 14nm 10nm 10nm
        TSMC 28nm 28nm 20nm 20nm 16-20nm hybrid

        2016 looks rough for the foundry users and once Intel's SoC products go to 22nm they get a process lead they never lose.

        'Andrew Lu - Barclays

        Thank you. Dr. Chang and Lora, thank you for taking my question. My first question is regarding earlier, Dr. Chang mentioned year 2014, the 20-nanometer volume will be higher than 12, and the 15 will be higher than 13. Is that including 16 – year 2015 as well?
        Morris Chang

        No, it does not.
        Andrew Lu - Barclays

        So only 20 high scheme located?
        Morris Chang

        Andrew Lu - Barclays

        Okay. Thank you.
        Morris Chang

        If you go to 2016, then I would tell you something different, but let’s not go there for the time being. Yes.
        Andrew Lu - Barclays

        So, do you suggest that what we know – production year 2015?
        Morris Chang

        I think it will be very, very small.'

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