Chairman and Founder Morris Chang of Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, said on Tuesday that Chinese chip design customers are becoming the most significant growth drivers for the company and helping it to outperform peers.

"When it comes to growth rates, Chinese clients are advancing at the fastest pace," Chang told reporters at a press conference after TSMC's annual general meeting. "It is a very important growth driver."

Chang reaffirmed the forecast he provided in January that the chipmaker would grow 5% to 10% year-on-year in revenue and operating profits for 2016.

"The second half looks not bad at the moment especially for semiconductor companies," said Chang. Analysts have said that TSMC is benefiting significantly from becoming the sole supplier for Apple's A10 chips to be adopted by the next iPhone 7. TSMC is currently sharing A9 chip orders with South Korea's Samsung Electronics.

The Nikkei Asian Review reported in May that TSMC is unlikely to reach its full-year target set by Chang in January due to weak demand for Apple's iPhone 7 scheduled for release in the second half of 2016. Apple has scaled back orders for core processors in iPhone 6s and 6s Plus since the end of last year, according to a source.

A person familiar with the matter told NAR on Tuesday that while Apple seems to be placing more-than-expected orders for the third quarter, TSMC's chip shipments for Apple is still set to drop 15% year-over-year in the second half.

TSMC is building a $3 billion facility in the southern Chinese city of Nanjing. The new China unit is set to churn out advanced 16-nanometer chips now used in core processors of Apple's iPhone 6s series in the second half of 2018.

TSMC's Nanjing project aims to gain more access to China's expanding chip market. China is planning to inject as much as $1.2 trillion yuan over a decade to boost the domestic chip industry.

The chipmaker recently appointed company veteran Roger Luo as general manager of the Nanjing facility. Luo is also doubling as vice president of business development for TSMC's China operations.

TSMC Vice President Y.P. Chin hinted in late May that TSMC may grow its operations in China, saying that the company has set aside land for future development near the Nanjing site.

TSMC previously said in a statement that the Chinese semiconductor market has grown rapidly in recent years, and the compound annual growth rate of TSMC's revenue from Chinese customers has exceeded 50% in the past five years. It has more than 100 China-based clients, out of a total of 470 worldwide.

Chang said he welcomed China's investment in Taiwanese chip designers and chip assemblers, though he did voice concerns over possible technology leaks and the need to protect intellectual property rights. While Chinese funds are allowed to invest in Taiwanese chip assemblers, Taiwanese regulators still ban Chinese entities from investing in local chip designers.

"If Taiwanese chip designers begin to take money from Chinese entities, they should not allow these investors to install members on their boards," said Chang.

"We should prevent Chinese representatives from penetrating into the boards of local chip companies to avoid possible technology leaks."

Chang said there was likely more consolidation in the global chip industry as the sector is stagnant and "there are too many companies" in the market.

By: DocMemory
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