Taiwan’s TSMC Notches Record Profit on Mobile Chip Demand

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip manufacturer, rode heavy demand from smartphone clients to a record net profit in the third quarter, handily beating market expectations.

The company nabbed orders for the chips in the latest smartphones from Apple, according to industry watchers, which went on sale in September and are expected to be major contributors to TSMC’s bottom line ahead of the year-end shopping season.

This helped the semiconductor firm earn net profit of T$76.3 billion ($2.51 billion) in the July-September period, versus expectations of T$72.9 billion from 21 analysts polled by Thomson Reuters.

It also helped the company notch a 26 percent on-quarter rise in revenue from communication devices, even as computer-related revenue fell 6 percent.

TSMC had reported net profit of T$59.7 billion in the second quarter and T$52 billion in the same three months of 2013.

Overall revenue of T$209 billion in the third quarter also hit a record, eclipsing the T$183 billion from the previous three months.

Analysts estimate that direct Apple orders contribute about six percent of revenue for TSMC, which boasts more than twice the production capacity of chief adversary Samsung Electronics. This makes it an attractive choice for the Silicon Valley powerhouse, which also competes against Samsung in smartphones.

Other TSMC clients such as Qualcomm and Broadcom supply Apple as well, and Yuanta Securities analyst George Chang estimates that such second-hand orders contribute as much as another 15 percent to TSMC sales.

Qualcomm rival MediaTek, whose chipsets are popular among low-cost smartphone vendors in emerging markets such as China, also counts TSMC as its main foundry partner, according to MediaTek CFO David Ku.

TSMC shares closed flat ahead of the earnings release, versus a 0.25 percent fall in the broader TAIEX index.

(Editing by Christopher Cushing)