Samsung – TSMC’s strong competitor in technology
In the previous part of the series, we saw that communication semiconductors drive Taiwan Semiconductor Manufacturing Company’s (or TSMC’s) (TSM) revenue. A slowdown in the overall smartphone market, especially high-end smartphones, affected the company’s earnings in the last two quarters. This was offset by an increasing demand from Chinese handset makers.
As a result, TSMC has been moving quickly with its 16nm (nanometer) ramp-up and the development of 10nm and 7nm technologies. Let’s see the share of each technology toward the company’s revenue.
As seen in the above graph, the contribution of 16/20nm has been increasing, and 28nm has been declining. The contribution of 16/20nm toward wafer revenue fell from 24% in fiscal 4Q15 to 23% in fiscal 1Q16. Reduced orders from Apple (AAPL) and the loss of Qualcomm (QCOM) led to a lower utilization of 16/20nm technology.
According to Gartner, the 20nm and 16nm FinFET (fin-field-effect-transistor) technology helped TSMC secure orders for application processors and the baseband modem chips. Given the current shift to mid and low-end smartphones, the foundry started mass production in fiscal 1Q16 of 16FFC (16 FinFET Compact), a low-power, low-cost version of FinFET technology for lower-end smartphones.
As you can see in the above graph, revenue from 28nm chips increased from 25% in fiscal 4Q15 to 30% in fiscal 1Q16. A strong demand for 28nm technology from mid and low-end smartphone vendors helped the company maintain the 28nm utilization rate above 90%.
The company is investing $9 billion–$10 billion in capital expenditure in fiscal 2016 to ramp up production of 16nm and bring into production 10nm and 7nm technology over the next two years. It would build a 12-inch fabrication facility in Nanjing, China (FXI).
In the next part of this series, we’ll look into the company’s technology efforts.