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UPDATE: TSMC Raises Capital Expenditure, Gives Rosy Second-Quarter Outlook


--TSMC's first-quarter net profit rises 18% from a year earlier

--Robust results and upbeat second-quarter outlook due to strong demand for high-performance chips

--World's biggest contract chip maker will boost capital expenditure by 11% this year


By Lorraine Luk


TAIPEI--Taiwan Semiconductor Manufacturing Co. (TSM) presented an upbeat outlook for the second quarter citing strong demand for chips in smartphones and tablets after reporting a better-than-expected first quarter net profit.

The world's biggest contract chip maker, which counts Qualcomm Inc., Advanced Micro Devices Inc. and Texas Instruments Inc. among its clients, also raised its capital spending for this year to between US$9.5 billion and $10 billion, from $9 billion expected previously.

The rise of smartphones and tablets has boosted demand for smaller and more powerful chips, which help make mobile devices sleeker and more energy efficient.

Chairman Morris Chang said at a press conference smaller mobile devices will continue to drive demand for the company's chips and production capacity will continue to grow over the next three years.

"We are confident about the future," Mr. Chang said.

TSMC said first-quarter net profit rose to $39.58 billion New Taiwan dollars (US$1.18 billion) from NT$33.49 billion a year earlier, slightly above an average NT$38.60 billion forecast of eight analysts polled by Dow Jones Newswires.

First-quarter consolidated revenue rose 26% to NT$132.76 billion from NT$105.62 billion a year earlier. Gross margin rose to 45.8%, above its guidance of 43.5%-45.5%.

As makers of mobile devices accelerate product launches, TSMC's second-quarter revenue could reach between NT$154 billion to NT$156 billion from NT$132.76 billion in the first quarter, Chief Financial Officer Lora Ho said at an investor conference.

Gross margin could improve to 47.5%-49.5% from 45.8% in the first quarter, and operating margin could rise to 35%-37% from 33.5%, Ms. Ho said.

Analysts remain bullish on TSMC's growth prospects this year. The growing spat between Apple Inc. and Samsung Electronics Co. could give the Taiwanese company the opportunity to replace Samsung as the manufacturer of internal processors for the U.S. company's devices, analysts said. TSMC hasn't confirmed plans to supply processors to Apple.

Sanford Bernstein Research analyst Mark Newman said he expects TSMC to start mass producing mobile processors for Apple next year.


Write to Lorraine Luk at


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April 18, 2013 03:45 ET (07:45 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.

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