Taiwan Semiconductor Manufacturing Company (TSMC) has revised downward its first-quarter 2019 guidance following the completion of an assessment of all wafers recently affected by a batch of problematic photoresist material.

The incident is expected to reduce TSMC's first-quarter 2019 revenues by about US$550 million, gross margin by 2.6pp, operating margin by 3.2pp, and EPS by NT$0.42, the foundry house said.

TSMC said it discovered that a batch of photoresist from a chemical supplier contained a specific component which was abnormally treated, creating a foreign polymer in the photoresist that affected 12/16nm wafers at its Fab 14B.

To ensure the quality of wafers delivered to customers, TSMC said they have decided to scrap a higher number of wafers than its earlier estimate.

The wafers scrapped in the first quarter will be made up in following quarter, said TSMC. This will contribute about US$550 million to second-quarter 2019 revenues, increasing gross margin by 1.5pp, operating margin by 2.1pp, and EPS by NT$0.34, according to TSMC's latest revision to its guidance.

For full year 2019, this photoresit incident is forecast to reduce gross margin by 0.2pp, operating margin by 0.2pp, and EPS by NT$0.08, said TSMC.

TSMC said it has taken action to pull in certain production from the second quarter, and has seen some increases in demand. These will result in about US$230 million of additional revenues in the first quarter, it said.

The company now expects first-quarter revenues to be between US$7 billion and US$7.1 billion, with gross profit margin to be between 41% and 43%, and operating profit margin between 29% and 31%.

TSMC said it has maintained constant communication with customers affected by the incident, and has worked out replacement and delivery schedules with each of them.

By: DocMemory
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