TSMC Q4 profit grows on higher chip demand

Demand for the company's products was higher than expected

Taiwan Semiconductor Manufacturing Co. (TSMC) said its fourth quarter net profit increased by 31.6 percent year-over-year, with demand for its chips higher than originally projected.

Net profit for the company during the fourth quarter ending on Dec. 31 reached NT$41.6 billion (US$1.4 billion), up from NT$31.6 billion in the same period a year ago. 

Revenue was NT$131.3 billion, a year-over-year increase of 25.4 percent. This met the upper-end of the company's projections for the quarter. 

TSMC is the world's largest contract chip maker, and manufactures mobile processors for Qualcomm and Nvidia, with rumors persisting that Apple could also be among its customers. The company's 28-nanometer chip manufacturing process is being used to build some of the newest smartphone and tablet chips in the market.

During the fourth quarter, the company's 28-nanometer chips made up 22 percent of the company's revenues, marking a 9 percentage point increase from the previous quarter

Demand for the company's chips exceeded projections three months ago, said TSMC executives in an investors' conference on Thursday. Mobile device manufacturers were accelerating their product launches to early this year, resulting in the higher demand.

"28-nanometer technology was a resounding success," said TSMC CEO Morris Chang. "The production in 2012 increased more than 30 fold over 2011."

Early last year, TSMC said it was having trouble meeting demand for 28-nanometer chips, with clients such as Qualcomm also pointing to a shortage in supply. But for this year, TSMC said production of its 28-nanometer chips will triple from 2012, Chang said. This will result in 28-nanometer chips making up more than 30 percent of its revenues for the entire year. 

"In spite of a lot attempts at competition, we have enjoyed throughout the year close to 100 percent foundry market share in 28-nanometer technology," he added. Chang expects that market share to hold to close to 90 percent for this year.

At the end of 2012, TSMC also increased its research and development staff to 3,900 employees, up from 3,400 a year ago.

For this year's first quarter, TSMC projects that its revenues will reach between NT$127 billion to NT$129 billion. This would mark an increase from the NT$105.5 billion in revenue it earned in last year's first quarter.

About 32 percent of the company's revenue for 2013 will come from smartphones and tablets, said TSMC chief financial officer Lora Ho in the investor's conference.

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