Taiwan Semiconductor Manufacturing Co. (TSMC) reported first quarter net profit falling by 7.7 percent year-over-year, but the company expects to see profit growth later in the year, as a result of better economic conditions and chip orders exceeding projections.
In the first quarter ended March 31, the company's net profit reached NT$33.47 billion (US$1.14 billion), down from NT$36.28 billion in the same quarter a year earlier. Revenue for the quarter, however, slightly surpassed company forecasts, reaching NT$105.51 billion, up 0.1 percent year-over-year.
TSMC, the world's largest contract chip manufacturer, gets about one-third of its revenue from the production of processors used in mobile phones, which the company stated on Thursday contributes to much of its growth as well. The company's customers include smartphone chip vendors Nvidia, Qualcomm, and Texas Instruments who get their chips made at the foundry.
In the third and fourth quarter of last year, the company saw profits sink by 35 and 22 percent respectively, with chip demand brought down by weak economic conditions. TSMC saw improvement in the first quarter of this year because of better economic conditions in the U.S. and China, the company's largest markets, coupled with incoming chip orders beating expectations.
"The news in the last quarter has ranged from encouraging to exciting," said TSMC CEO Morris Chang during an investors' conference on Thursday, "After two quarters of sequential decline, TSMC's business points to a solid growth this year." The growth will likely start in the third quarter, Chang added.
Last year, TSMC started chip production using its 28-nanometer manufacturing process to make more powerful microprocessors. By this year's fourth quarter, chips made with 28-nanometer process will make up more than 20 percent of the company's revenue, Chang said. For the past quarter, 28-nanometer chips accounted for 5 percent of revenues.
"28-nanometer is turning out to be a roaring success," Chang said, with the demand leading to a supply shortage. "I think the worst of the supply shortage is behind us," he added. "We will be close to having caught up by the fourth quarter."
The company's 28-nanometer manufacturing process will pave the way for better financial results in the long-term, according to Chang. But TSMC also plans to start 20-nanometer chip production by the end of this year, which promises to bring even more advanced microprocessors to the market. Moving to 20-nanometer chip production, however, means manufacturing equipment costs will rise, which TSMC hopes to cut down over time, Chang said.