Taiwan Semiconductor Manufacturing Co. (TSMC) reported second-quarter net profit up by 16.3 percent year-over-year, driven by increasing demand for mobile chips.
The world's largest contract chip manufacturer said net profit for the quarter ending June 30 reached NT$41.81 billion (US$1.39 billion), up from NT$35.95 billion a year earlier. Revenue for the quarter reached the higher end of the company's projections, up 15.9 percent year-over-year at NT$128.06 billion.
TSMC produces processors for smartphone and tablet chip vendors including Nvidia, Qualcomm and Texas Instrument. Part of this quarter's profit growth resulted from TSMC's use of a new 28-nanometer chip manufacturing process. Second-quarter revenue from 28-nanometer chips was up nearly 90 percent from the previous quarter.
In the third quarter, TSMC expects the profit growth to continue, with revenue of NT$136 billion to NT$138 billion. Shipments of 28-nanometer chips will double by the end of the third quarter, and eventually make up 20 percent of the company's revenue by the fourth quarter, the company said.
"Second quarter was good, very good and we expect a good third quarter," said TSMC CEO Morris Chang during an investors' conference on Thursday.
The company will nearly meet demand for 28-nanometer chips by this year's fourth quarter, he added, with demand fully met by next year's first quarter. Qualcomm said earlier this year the company was seeing a shortage of its new Snapdragon S4 processor because of lack of manufacturing capacity.
TSMC, however, expects to see a future dip in the company's earnings due to weakening economic conditions in the U.S., where job growth is weak, and in other countries including Europe, Japan and China, according to Chang. The financial dip will start in the fourth quarter, and extend into next year's first quarter. But by next year's second quarter, the company will rebound strongly, Chang said.
Next in line after the company's 28-nanometer manufacturing process is the company's 20-nanometer process, which will be used for small-scale chip production in 2013, and then for full production in 2014, Chang said. Using the 20-nanometer process, TSMC can build faster and more power-efficient chips.
Chang acknowledged the competitive landscape for the company has changed for TSMC, as Samsung and Intel have emerged as major rivals in producing microprocessors for mobile devices. Previously, the company only counted UMC and GlobalFoundries among its competitors.
"I think its a very competitive environment. Our competitors have changed. They are even more powerful and more intimidating than our old competitors. Not that we are intimidated," Chang said.