Taiwan Semiconductor Tells a Good Story, but Will It Deliver On FinFETs?

TSMC made some bold claims on its recent earnings call with respect to its upcoming FinFET technology, but will it really deliver as promised?

Jan 19, 2014 at 10:00AM

Taiwan Semiconductor (NYSE:TSM) is the world's leading independent semiconductor foundry. The company builds chips for just about every chip design house today, including the likes of Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ:BRCM). The company has seen a boom in demand, driven primarily by explosive growth in demand and the performance needs of mobile processors. However, despite being a solid company, management made some very unusual statements on its recent call vis-à-vis its 16-nanometer FinFET technology.

20-nanometer is in "volume production," but when will it reach market?
On the call, TSMC's management noted that it was in high-volume production of its 20-nanometer manufacturing process today. However, it's important to note that there is a big difference between being in "volume production" and actually shipping product in mass quantities to customers.

Indeed, there has not yet been a single application processor announced for the 20-nanometer node. Further, the one mobile product that has been announced -- Qualcomm's 20-nanometer MDM9x35 modem -- is sampling in the first half of 2014 for launch in the second half. This tends to suggest that mobile applications processors built on the 20-nanometer node won't show up until 2015.

TSMC calls Intel out on FinFETs
One of the most surprising things on the call was that TSMC actively called Intel (NASDAQ:INTC) out on the claims that it made at its recent investor meeting. In particular, TSMC -- with no knowledge of the characteristics of Intel's 14-nanometer manufacturing process -- said that Intel's comparison was "highly misleading." In particular, TSMC stated that Intel's claims of a 35% density advantage over products built on TSMC's 16-nanometer process are wrong -- the difference is much smaller.

TSMC claims that customers will be taping out (i.e., completing initial designs) of products on its 16FF process during 2014. Since TSMC claimed multiple tape-outs on 20-nanometer throughout 2013, and since those 20-nanometer products still haven't hit the shelves in early 2014, it would stand to reason that products based on TSMC's 16FF process won't actually be available to consumers until the second half of 2015.

Intel has already "taped out" 14-nanometer products
While TSMC claims that the first customer tape-outs on 16FF are coming throughout the year, and that it will be on time/target with Intel's 14-nanometer products, it's difficult to ignore that Intel has actually been taping out extremely sophisticated 14-nanometer designs for quite some time. In particular, the company demonstrated its next-generation, low-power, PC-oriented Broadwell processor running in a laptop at September's Intel Developer Forum.

This implies that Intel taped out its first 14-nanometer products in late 2012/early 2013. Consider, then, that these products won't show up in systems until the second half of 2014. This would imply a gap of at least a year and a half from "initial tape out" to "showing up in commercial systems." Given that this is the case, investors should not expect to see TSMC generate material revenue from 16FF, particularly in high-volume mobile devices, until the second half of 2015.

Foolish bottom line
TSMC is a great semiconductor manufacturer and has been one of the key driving forces in the fabless semiconductor industry. However, it's tough to ignore that, while TSMC proclaims it will "out-compete" both Intel and Samsung on its earnings calls, the facts paint a grimmer picture. Intel really does have a lead in manufacturing technology, both from a node-for-node perspective as well as on timing. Intel will be in the market with 14-nanometer parts in 2014. TSMC's customers, on the other hand, may not be until the second half of 2015.

More compelling ideas from The Motley Fool
There are few things that Bill Gates fears. Cloud computing is one of them. It's a radical shift in technology that has early investors getting filthy rich, and we want you to join them. That's why we are highlighting three companies that could make investors like you rich. You've likely only heard of one of them, so be sure to click here to watch this shocking video presentation!

Ashraf Eassa owns shares of Broadcom and Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers