《TAIPEI TIMES 焦點》 TSMC cuts capital spending by 27%

CAPITAL EXPENDITURE: Despite a sharp downturn in the semiconductor industry, analysts say that TSMC’s partnership with Apple Inc remains strong

By Lisa Wang / Staff reporter

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Taiwan Semiconductor Manufacturing Co （TSMC, 台積電）, which supplies chips for Apple Inc’s iPhone 6S smartphones, yesterday slashed this year’s capital spending by 27 percent, after weak demand for smartphone chips drove down quarterly net profits to their lowest in five quarters.

TSMC plans to spend US$8 billion on new equipment and facilities this year, rather than allocating a capital budget of between US$10.5 billion and US$11 billion as it estimated in June. This year’s spending is the lowest since 2011.

Earlier this week, Intel Corp cut its capital spending for the fourth time to US$7.3 billion amid a slowing market demand.

“This year, due to weaker global economy, a stronger US dollar and volatile financial markets, consumer electronics market has been negatively effected. This results in a lack of growth in the overall semiconductor market,” TSMC co-chief executive Mark Liu （劉德音） said.

Liu cut his growth forecast for the world’s semiconductor industry to zero this year, from an annual growth of 3 percent that he estimated in June. He attributed the flat performance to customers’ adjusting their inventories amid sluggish demand for smartphone chips.

Chip designers are expected to see their revenues drop by 5 percent annually this year, Liu said.

However, TSMC will grow its revenue by about 10 percent this year from last year’s NT$762.81 billion （US$23.5 billion）, partly because of strong US dollar against the New Taiwan dollar, Liu said.

Liu said he expected customers to reduce their inventories to a normal level at the end of this quarter.

TSMC chief financial executive Lora Ho （何麗梅） said the capital reduction reflects the company’s improving operational efficiency and favorable foreign exchange rate, rather than losses in orders or market share.

The company expects a higher capital budget next year as it is to ramp up its advanced 10-nanometer chip production in the fourth quarter of next year as scheduled.

“TSMC’s capital reduction indicates the company has better operational efficiency as its depreciation costs will only increase 11 percent annually,” said an analyst from an European brokerage firm, who declined to be named.

The analyst said TSMC might continue to outperform its peers even during the current slowdown and the company has a good chance to extend its partnership with Apple next year.

TSMC said revenue this quarter is expected to shrink moderately, by between 4 percent and 5.42 percent, from last quarter to a range from NT$201 billion to NT$204 billion. A significant ramp up of its 16-nanometer chips this quarter will partly offset slowing demand, the chipmaker said.

Gross margin is expected be between 47.5 percent and 49.5 percent this quarter, from 48.2 percent last quarter, it said.

Last quarter, net profit fell 5.1 percent to NT$76.33 billion from NT$79.42 billion in the previous quarter. Last quarter’s figure included a loss of NT$2.8 billion from the company’s solar business.

Commenting on potential investments in China, Ho said the company is cautiously evaluating the possibilities. The company is in no rush to build another factory there in the short term, Ho said.

新聞來源：TAIPEI TIMES