Morris Chang, chairman of foundry Taiwan Semiconductor Manufacturing Co. Ltd. (Hsinchu, Taiwan), has told analysts that his company would likely fall behind a "major competitor" in foundry market share for 16nm/14nm FinFET node in 2015, but would then go on to be market leader at 16nm/14nm in 2016 and subsequent years.
This is despite the fact that TSMC has reportedly just started shipping application processors for Apple and reported record revenue and profits for the second quarter of 2014.
That major competitor is taken to be Samsung by observers although Chang did not specifically mention the South Korean company. Samsung is working in partnership with Globalfoundries Inc. to supply the Samsung-developed 14LPE and 14LPP processes to customers as a matter of urgency. Both companies expect to be in volume production before the end of 2014 (see Samsung, Globalfoundries Form 14nm Alliance to Fight TSMC)
The reason why TSMC will be eclipsed, albeit temporarily in Chang's view, is because it has committed itself to 20nm planar CMOS production while the "major competitor" has skipped the 20nm node, Chang said. "We got started a little late because we chose to also do 20nm."
But Chang said that the steady progress of working on 20nm first and then moving relatively quickly to 16nm FinFET would bring long-term success. Chang added: "In my mind the 16nm battle has already been fought. For me the looming battle is 10nm but I am not going to say anything about it today."
However, Chang did say that on technical grounds TSMC believes its 10nm process is competitive, being 25 percent faster, 45 percent low power than the 16nm FinFET process and offering 2.2 times the gate density of the 16nm process. He also added that customer tape-outs for the 10nm FinFET node are scheduled to happen in the second half of 2015.
Chang was speaking to analysts on a conference call and meeting held to discuss TSMC's record-breaking second quarter financial results.
Inventory building could drive record TSMC Q3 sales
TSMC announced a record net income of NT$59.7 billion (about $2.0 billion) on consolidated revenues of NT$183.02 billion (about $6.10 billion) for its second quarter financial results. In US dollar terms, 2Q14 revenue increased 24 percent from the previous quarter and increased 16.3 percent year-over-year. The third quarter is also expected to be a record quarter with TSMC sales at between NT$206 billion and NT$209 billion, which represents a sequential growth of between 12 and 15 percent.
The company said that 20nm circuits had started to ship in June 2014 and that 28nm production had ramped in 2Q14 to 37 percent of total sales over the quarter, up from 34 percent in the previous three-month period. The 28 and 45nm production were responsible for 56 percent of sales in the record quarter.
TSMC had spent $6.2 billion on capital expenditure in the first half of 2014, according to Lora Ho, chief financial officer, but she said the company would not be increasing its 2014 capex budget of between $9.5 billion and $10 billion.
Chang made the analysis that the very strong first half was partly as a result of building inventory from a very low point at the end of 2013. Chang said that at mid-year inventory was about at the seasonal level, that it would continue to build in 3Q14, helping drive another record quarter but would then decline in 4Q14.
The 20nm node is expected to ramp quickly and account for about 10 percent of TSMC's total sales revenue in 3Q14 and more than 20 percent of sales in 4Q14. "Demand for 20nm will remain strong in 2015 at more than 20 percent of tota wafer revenue," said Chang.
"In 20-SoC we will enjoy overwhelming market share in 2014/2015. In 16nm in 2015 we will have smaller market share compared to a customer but we will have larger market share in 2016, 2017 and onwards."
Chang stressed that observers should really take the 20nm planar CMOS and the 16nm/14nm FinFET generations together and that on the combined data TSMC would remain market leader. "I have a feeling 16nm will be as strong or stronger node for us as 20nm," Chang said.
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