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TSMC forecasts upbeat 2014 on mobiles and margins

* Q1 slowdown seen ahead of new product launches by clients

* Smartphones, wearables, Internet of Things will drive growth

* Co-CEO says technology better than claimed by rival Intel

By Clare Jim and Michael Gold

TAIPEI, Jan 16 (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd painted a bright outlook for its 2014 business, driven by mobile devices and improved margins from its more advanced chips.

The one cloud on the horizon for the company, which beat expectations with a 7.7 percent rise in fourth-quarter net profit, is a forecast sales slowdown in the first quarter due to a pull-back of purchases ahead of new product launches by smartphone and tablet manufacturers.

TSMC said it still expects double-digit growth in sales and profit for 2014. The company is confident that its cutting-edge technologies will help fend off competition from global rivals such as Intel Corp.

TSMC is betting on a protracted boom in the mobile devices segment, which includes smartphones and wearable devices, and is investing billions of dollars to pack more processing power in ever shrinking chips.

At the recent Consumer Electronics Show in Las Vegas, "we saw wearable devices emerging in all different kinds of forms," Mark Liu, one of TSMC's new co-chief executives told reporters on Thursday. "This will serve as a new driver going forward".

He said the more complex devices will allow TSMC chips to integrate more features like fingerprint sensors, resulting in TSMC earning more dollars per smartphone sold.

Liu and the other co-chief executive C.C. Wei, who joined chairman Morris Chang on stage for the first time, took issue with Intel's assertion that the U.S. company's latest technology was much more advanced.

Liu told an investor conference that what Intel has shown investors was "erroneous and based on outdated data".

"(Our latest generation process) scaling is much better than what Intel said, though still a little bit behind," Liu said, adding that TSMC has a "far superior" ability to execute a short time to market for customers than Intel and Korean rival Samsung Electronics Co Ltd.

Earlier this week, Intel said it has delayed opening a major factory in Arizona that was originally planned to start producing chips made from the most advanced 14 nanometer process after it was hit by slumping personal computer sales.


This year, TSMC is speeding up its technology development to build the tiniest and most powerful chips for smartphones and tablets.

TSMC, after dominating the 28-nanometer technology for several quarters, is moving to a more advanced 20-nanometer process with mass production expected this quarter.

The smaller the process means more transistors can be added on to a chip, making it more powerful and efficient.

It plans to start mass production using a 16 nanometer FinFET process in 2015.

TSMC kept its 2014 capital spending plan at around $9.5 billion to $10 billion, the same level as last year.

The plan came in below market expectations that it would target another record year of spending after laying out $9.7 billion in 2013.

The Taiwanese semiconductor maker had the third-largest capital spending in the chip industry last year, trailing Samsung Electronics, which spent around $22 billion, and Intel which spent around $11 billion.

On Thursday, TSMC said it posted a net profit in the fourth quarter of T$44.81 billion, beating analysts' estimates of $42 billion.

The company also said it expects first-quarter revenue to fall as much as 6.7 percent from the previous quarter to between T$136 billion and T$138 billion ($4.52 billion to $4.59 billion), down from T$145.81 billion in the fourth quarter and below market forecasts of T$140.56 billion.

The company blamed the projected fall on an industry undergoing an inventory correction in the supply chain due to a pull-back of component purchases ahead of new product launches by mobile gadget companies in a new year.