TSMC Reports Second Quarter EPS of NT$2.80 !

[Daniel Nenni]

As I have mentioned in my posts, I have never been more optimistic on TSM since 28nm. 16FFC with InFO is going to take the SoC market by storm in 2H 2016 with other markets following in 2017. In 2018 16FFC will hit the new TSMC China fab and it will be deja vu all over again, absolutely!

Thoughts? Let's talk about this. Maybe I'm missing something?

TSMC SLIDES

MANAGEMENT REPORT

Hsinchu, Taiwan, R.O.C., July 14, 2016 -- TSMC today announced consolidated revenue of NT$221.81 billion, net income of NT$72.51 billion, and diluted earnings per share of NT$2.80 (US$0.43 per ADR unit) for the second quarter ended June 30, 2016.

Year-over-year, second quarter revenue increased 8.0% while net income and diluted EPS both decreased 8.7%. If the non-recurring gains in second quarter of 2015 were excluded, the second quarter 2016 net income and diluted EPS would have both increased by 17.2% year-over-year. Compared to first quarter 2016, second quarter results represent a 9.0% increase in revenue, and an 11.9% increase in net income. All figures were prepared in accordance with TIFRS on a consolidated basis.

In US dollars, second quarter revenue was $6.84 billion, which increased 11.4% from the previous quarter and increased 2.7% year-over-year.

Gross margin for the quarter was 51.5%, operating margin was 41.2%, and net profit margin was 32.7%.

Shipments of 16/20-nanometer accounted for 23% of wafer revenues, and 28-nanometer process technology accounted for 28% of total wafer revenues. Advanced technologies, defined as 28-nanometer and more advanced technologies, accounted for 51% of total wafer revenues.

“Second quarter results exceeded the high end of our guidance given three months earlier mainly due to demand increases in mid- and low-end smartphone segments and customer inventory restocking,” said Lora Ho, SVP and Chief Financial Officer of TSMC. “We expect our business in the third quarter will benefit from new product launches by major mobile device customers as well as continued inventory restocking by our customers. Based on our current business outlook and exchange rate assumption of 1 US dollar to 32.30 NT dollars, management expects overall performance for third quarter 2016 to be as follows”:

[table] style="font-family: Times New Roman; font-size: 10pt"
|-
| align="left" valign="top" style="width: 3%" | •
| valign="top" style="width: 1%" |
| align="left" valign="top" | Revenue is expected to be between NT$254 billion and NT$257 billion;
|-
[/table]

[table] style="font-family: Times New Roman; font-size: 10pt"
|-
| align="left" valign="top" style="width: 3%" | •
| valign="top" style="width: 1%" |
| align="left" valign="top" | Gross profit margin is expected to be between 50% and 52%;
|-
[/table]

[table] style="font-family: Times New Roman; font-size: 10pt"
|-
| align="left" valign="top" style="width: 3%" | •
| valign="top" style="width: 1%" |
| align="left" valign="top" | Operating profit margin is expected to be between 39.5% and 41.5%.
|-
[/table]

The management also states 2016 capital budget to be between US$9.5 billion and 10.5 billion.

Guidance
[table] cellpadding="4" style="width: 100%"
|-
| rowspan="2" align="center" |
| colspan="2" align="center" | 2Q16
| colspan="1" align="center" | 3Q16
|-
| align="center" style="width: 25%" | Actual
| align="center" style="width: 25%" | Guidance
| align="center" style="width: 25%" | Guidance
|-
| align="left" | Net Revenue
(NT$ billion)
| align="center" | 221.81
| align="center" | 215-218
| align="center" | 254-257
|-
| align="left" | Gross Margin
| align="center" | 51.5%
| align="center" | 49%-51%
| align="center" | 50%-52%
|-
| align="left" | Operating Margin
| align="center" | 41.2%
| align="center" | 38.5%-40.5%
| align="center" | 39.5%-41.5%
|-
| align="left" | Exchange Rate
(USD/NTD)
| align="center" | 32.41
| align="center" | 32.30
| align="center" | 32.30
|-
[/table]

 

[Daniel Nenni]

There are some VERY interesting topics for discussion in here:

Taiwan Semiconductor Manufacturing's (TSM) CEO Mark Liu on Q2 2016 Results - Earnings Call Transcript | Seeking Alpha

 

[Arthur Hanson]

Some people are thinking the smart phone has peaked, I feel it is just beginning, for the smart phone will be the foundation enabling everything we touch and customizing it to our needs. The health care area is the next frontier for the smart phone to conquer by enabling the monitoring of almost every function and parameter of the human body and in the near future modify them for health needs. The smart phone will be the controller for a whole host of devices beyond sound, video, navigation and other well established areas. What ever device you interface with, your smart phone will provide customization to the functions you want. Advanced semis, mems and actuators of all types on almost everything will be controlled by your phone and with very advanced memory coming on the phone will also become you data vault storing terra bytes of needed information in the near future. It isn't a smart phone anymore, but our interface to the entire world around us and the exploration of its versatility is still in its infancy. Entire devices will be built around the smart phone lowering their cost dramatically by providing the intelligence, interface, memory and communications that comprise the major costs of many, many devices in this world and unifying the world around us by taking what are now custom platforms and unifying them to a standard platform. This will change the game in much of the world we touch and this is just the beginning. TSM fully understands this and is set to become the foundation of this new world.

 

[hist78]

Some people are thinking the smart phone has peaked, I feel it is just beginning for the smart phone will be he foundation enabling everything we touch and customizing it to our needs. The health care area is the next frontier for the smart phone to conquer by enabling the monitoring of almost every function and parameter of the human body and in the near future modify them for health needs. The smart phone will be the controller for a whole host of devices beyond sound, video, navigation and other well established areas. What ever device you interface with, your smart phone will provide customization to the functions you want. Advanced semis, mems and actuators of all types on almost everything will be controlled by your phone and with very advanced memory coming on the phone will also become you data vault storing terra bytes of needed information in the near future. It isn't a smart phone anymore, but our interface to the entire world around us and the exploration of its versatility is still in its infancy. Entire devices will be built around smart phone lowering their cost dramatically by providing the intelligence and interface that comprise the major costs of many, many devices in this world and unifying the world around us by taking what are now custom platforms and unifying them to a standard platform. This will change the game in much of the world we touch and this is just the beginning. TSM fully understands this and is set to become the foundation of this new world.

Don't forget the role a smartphone can play in the entertaining and gaming. The ongoing Pokémon Go phenomenon is a loud and clear proof of that.

 

[Daniel Nenni]

The big surprise is that InFO revenue forecast was reduced from $200m to $100m in Q4 2016. That does not bode well for the iPhone 7.

 

[Daniel Nenni]

This right here made my day:

TSM Question-and-Answer Session

Elizabeth Sun
All right. Now let's begin the Q&A session. I think we will have the pessimistic analyst from JPMorgan to ask the first question, Gokul?

Gokul Hariharan
Thank you very much. First of all on smartphones, and growth coming from smartphones being half of the growth and computer also contributing to quarter....

Elizabeth Sun - Director of Corporate Communications,TSMC

 

[Daniel Nenni]

This is from the most recent IC Insights report:

Cellular Handset IC Market CAGR Forecast at 6.7% Through 2019
Cellphone IC market CAGR to exceed total IC market CAGR by 3.0 points through forecast.​

The increasing value of the average IC content in cellular handsets along with the increasing percentage of smartphones sold as a percent of total cellular handsets will help drive the cellphone IC market to $94.3 billion in 2019. Strong double-digit growth rates in the cellular handset IC market were logged in 2013 and 2014 but only a 2% increase was registered in 2015. Despite the expected increase of 4% in 2016, the 2015-2019 total cellphone IC market CAGR is forecast to be 6.7%, 3.0 points higher than the 3.7% CAGR forecast for the total IC market during this same time. The $94.3 billion 2019 cellphone IC market is forecast to be about 30% higher than the level registered in 2015....

http://www.icinsights.com/news/bulletins/

 

[lefty]

Anyone notice the "video games" comment in the conference call?

Sebastian Hou

Thank you, Dr. Sun. Just two quick follow-ups. The first one is that we noticed the consumer application in second quarter increased significantly, both from quarter-and-quarter and year-on-year perspective. Can you, C.C. or Mark, comment on that?

Elizabeth Sun
Video games.

What do people make of this? Up til now AMD has been manufacturing their console chips exclusively with Globalfoundaries. Are they switching to TSMC? I suppose it could be Nvidia as well, but as they always have used TSMC it doesn't explain the uptick.