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TSMC slashes $1B to 2015 capex

Posted: 17 Apr 2015 ?? ?Print Version ?Bookmark and Share

Keywords:capex? foundry? 16nm? Internet of Things? EUV?

Due to improvements in capital efficiency and faster migration to the 16nm process technology, Taiwan Semiconductor Manufacturing Co. has cut by $1 billion its planned capital expenditure for 2015.

The company, which in January weighed in with the chip industry's largest planned layout for expansion this year, said at an announcement of its first-quarter results today that its revised 2015 capex will fall within a range of $10.5 billion and $11 billion.

TSMC's slashed spending plan follows Intel, which earlier this week pared about $1.3 billion from its 2015 capex budget to a revised $8.7 billion. IC Insights earlier this year forecast that Samsung would take the number-two spot with a capex budget of $11.3 billion. The downward revisions come with a weaker outlook for the global economy.

"We think semiconductor industry growth this year has indeed adjusted down from 5 per cent earlier to 4 per cent," said TSMC Co-CEO Mark Liu. "It's really due to the macroeconomic situation around the world. The foundry growth rate will adjust down too. We're looking at about 10 per cent."


TSMC earlier this year said it was expecting 12 per cent annual revenue growth in 2015.

The company said that for the second quarter, some customers appeared too optimistic. As a result, inventory levels appeared to be higher than they expected. Recently, several TSMC customers in the mobile segment cut their delivery schedules. TSMC said its second-quarter demand will be below normal with revenue declining by about 7 per cent to 8 per cent from the first quarter.

Part of the hit also comes from TSMC rival Samsung.

"One impact was from Samsung ramping up with its own internal silicon," said Randy Abrams, an analyst with Credit Suisse in Taipei.

Samsung has cut orders with Qualcomm, a key TSMC customer, to make its own chips for the Galaxy S6 smartphone. The slashed orders were worth about $1 billion for processors as well as base band and power management chips, according to an analyst who wished to be unidentified. Samsung now has more flexibility to choose between internal silicon and external chip companies for their smartphones.

TSMC said it expects a recovery in second half of this year and overall double-digit growth in revenue compared with 2014.

Fast 16nm ramp

TSMC said it will increase 16nm while reducing 20nm capacity. Revenue from 16nm is likely to more than offset any losses from 20nm, according to the company.

On the capex cut, "conversion costs less than adding capacity. That's actually where this $1 billion reduction came from," said TSMC Chief Financial Officer Lora Ho. She said the commonality in equipment for 20nm and 16nm is about 90 per cent.

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