TSMC Posts Jump in First-Quarter Profit as Apple Deal Bears Fruit

By Aries Poon 

TAIPEI-- Taiwan Semiconductor Manufacturing Co., the maker of iPhone chips, reported Thursday a 65% jump in its first-quarter net profit, propelled by strong demand for Apple Inc. devices.

TSMC said its net profit for the three months ended March 31 was 78.99 billion New Taiwan dollars (US$2.53 billion), compared with NT$47.87 billion a year earlier, and was largely in line with analysts' expectations. Its revenue in the quarter reached NT$222.03 billion, the company said last week, up 50% from a year ago and matching the management's target.

Last year, TSMC broke Samsung Electronics Co.'s monopoly and became the primary supplier of chips for iPhones. Apple's massive orders pushed TSMC's revenue and earnings to record-highs in 2014.

But TSMC in January warned of a slower year ahead, as it expects to lose some orders to Samsung, which is months ahead in migrating to the next-generation chip process technology. The South Korean chipmaker's finer 14-nanometer technology will pack more capabilities on a chip and lower production costs, putting TSMC's contract with Apple at risk. Analysts say the rising supply of cheaper Chinese-made chips is also putting pressure on incumbent players including TSMC.

As the world's largest maker of non-memory microprocessors based on others' designs, sales at TSMC are seen as a barometer of global technology demand. Market research firm IDC says global smartphone shipment growth is set to slow to 12% this year, from 26% growth in 2014, as the market matures and becomes more crowded. A weaker euro and emerging-market currencies are also hurting smartphone demand in Europe and Latin America, analysts say. Adding to TSMC's woes, Qualcomm Inc., one of its major customers, l ost a massive contract to supply its new Snapdragon 810 processors to Samsung's latest flagship Galaxy S smartphones.

Analysts expect TSMC to trim its revenue guidance for this year. TSMC had projected its 2015 revenue to grow by "several percentage points" above the industry average of 12%. Ahead of the earnings release, a Thomson Reuters survey showed that analysts expect TSMC's revenue to rise 19% this year to NT$904.74 billion. Its revenue rose 28% last year.

Write to Aries Poon at [e-mail]

Access Investor Kit for Taiwan Semiconductor Manufacturing Co., Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=TW0002330008

Access Investor Kit for Apple, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0378331005

Access Investor Kit for Taiwan Semiconductor Manufacturing Co., Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US8740391003

Subscribe to WSJ: http://online.wsj.com?mod=djnwires