Taiwan-based chipmaker Taiwan Semiconductor Manufacturing Company (TSM -0.16%) got a late start to the 14/16-nanometer race. Being second to Samsung (NASDAQOTH: SSNLF) in terms of mass production start led it to have around 40% share of the 14/16-nanometer foundry market in 2015 (read: Apple's (AAPL 1.37%) A9 orders), with Samsung nabbing the remaining 60%.
However, company executives said on its most recent earnings call that during 2016, it expects to have more than 70% of the total 14/16-nanometer foundry market. Apparently, according to a report from Economic Daily News (via a pre-publication note in DIGITIMES), TSMC is putting its money where its mouth is and doubling its 16-nanometer wafer capacity from 40,000 wafer starts per month in February to a full 80,000 wafer starts per month in March.
This is expected to help TSMC achieve growth
This dramatically increased 16-nanometer wafer production is expected to help TSMC boost its revenue beginning in March, according to the report. Indeed, TSMC's current revenue guidance calls for revenue of between 201 billion New Taiwan Dollars and 203 billion New Taiwan dollars -- down from 222.03 billion New Taiwan dollars in the year-ago period.
However, TSMC did guide to full-year revenue growth in the range of 5-10% for the year on its most recent call, so it's little surprise that as the company brings additional 16-nanometer capacity online its revenues should return to growth.
TSMC's major 16-nanometer customers
DIGITIMES says that Apple, FPGA maker Xilinx, Huawei's silicon subsidiary HiSilicon, mobile chipmakers MediaTek and Spreadtrum, and graphics chipmaker NVIDIA" are reportedly among TSMC's major 16nm customers."
Indeed, this passes the common sense test. Apple is already using TSMC 16nm to build some of its A9 chips and all of its A9X chips and it is reportedly set to build all of the iDevice maker's next generation A10 processor.
HiSilicon should also consume a fair number of 16nm wafers as its Kirin 950 applications processor, as well as an upcoming networking chip, are built on this process as well.
Spreadtrum and MediaTek, too, recently announced high-end applications processors built seemingly exclusively on TSMC's 16-nanometer technology.
Finally, NVIDIA's graphics processors have been "stuck" on 28-nanometer technology since 2012, so a transition to 16-nanometer is long overdue and welcome. I suspect that NVIDIA will fairly quickly transition its lineup of graphics processors to 16-nanometer (the power/performance benefits are quite large) and, since it is the market share leader in graphics processors (with well over 75% share), drive a solid amount of volume.
Notably absent from this list is mobile processor leader Qualcomm, which has transitioned away from TSMC at the 14/16-nanometer node to Samsung.
Looking ahead to 10-nanometer
Unlike at the 14/16-nanometer node, in which TSMC had something of a slow start, the company said on its most recent earnings call that at the next technology node, 10-nanometers, it will "begin with a very high market share" and "intend[s] not to lose it."
I suspect that we will see the same customers that will make up the bulk of TSMC's 16-nanometer revenue in 2016 transition to TSMC's 10-nanometer node. Similarly, I expect that Qualcomm will stick with Samsung at the 10-nanometer node.
I look forward to hearing what TSMC management has to say in its April earnings call, particularly around its views of 16-nanometer market share in 2016 and any further updates on potential 10-nanometer share for 2017 and beyond.