Fab 2. Source: Taiwan Semiconductor Mfg. Co. Ltd.
On Oct. 15, contract chipmaker Taiwan Semiconductor Manufacturing Company (TSM +0.18%), or TSMC for short, reported its financial results for the third quarter of 2015. Following the release of the results, TSMC management held a conference call with analysts. In the call were a number of very interesting tidbits that are likely to be of interest to both current and potential investors in the chip-manufacturing giant.
Without further ado, here are three things TSMC management wants investors to know.
The skinny on the 10-nanometer node
According to TSMC co-CEO Mark Liu, development of the company's next generation 10-nanometer manufacturing technology is "well on track." Liu said this technology delivers a 2.1 times improvement in logic density over its prior generation 16-nanometer FinFET+ technology in addition to a performance uplift of 20% or power reduction of 40%.
Liu said customers will be begin taping out their designs on this process beginning in the spring of 2016. This means TSMC should be able to start producing sample chips for its customers.
Additionally, co-CEO C.C. Wei noted in the question-and-answer session that production on 10-nanometer should begin in the fourth quarter of 2016, with the first revenue from that initial production hitting the company's top and bottom lines in early 2017.
InFO packaging technology going into production next year; second gen in the works
One area that TSMC has been looking to expand into is advanced chip packaging technologies. One such packaging technology is called Integrated Fan Out Wafer Level Packaging, or InFO-WLP.
TSMC says that, compared to traditional packaging schemes, InFO can enable a greater-than 20% reduction in package size. The company also says this technology can lead to better performance and an improvement in thermals of a given chip.
For mobile devices, where thinner and more efficient are almost universally viewed as better, this sounds like a winning technology.
TSMC executives indicated on the call that it is aiming to begin the volume ramp of its InFO packaging technology in the second quarter of next year and that it should see in excess of $100 million in InFO revenue by the end of 2016.
Additionally, Liu mentioned that the company is "currently working on the second generation InFO technology." This second generation InFO, per Liu, will be used in several 10-nanometer and 7-nanometer products.
What's going on with capex?
TSMC announced it would be cutting its capital spending forecast this year from a prior range of $10.5 billion to $11 billion down to around $8 billion.
This reduction in forecasted capital spending for the year is driven by a number of factors, according to CFO Lora Ho.
About a third of the reduction, per Ho, is "due to operating efficiency gains" that allow the company to spend less for the same amount of production output.
Another 30% of the reduction is "due to changes in investment projects," which apparently includes the conversion of older 20-nanometer capacity to newer 16-nanometer capacity.
The next 20% of the reduction is "due to changes in capacity schedules," which suggests a push-out of capacity installation into the following year. And, finally, 17% of the reduction is due to the strengthening of the U.S. dollar against the euro, Japanese yen, and NT dollars.
Although the company is cutting its capital spending forecast for this year, Ho believes the company's 2016 capital spending should be higher than it will be in 2015. I suspect investors will get a formal capital spending forecast on the next quarterly earnings call.
