In order to expand its production capacities for advanced manufacturing processes, TSMC will continue to upgrade its facilities and increase purchasing expenditures. Currently TSMC’s primary manufacturing processes are for 28 nanometer chips, which occupied 37% of last season’s revenue.

TSMC will begin to manufacture 20 nanometer chips during the second half of the year, and this is expected to comprise 10% of TSMC’s revenue. However, this ratio is expected to increase to 20% in the fourth quarter, and then become the primary driving force behind revenue and profits for next year.

TSMC announced that this year’s capital expenditures are expected to amount to between US$ 9.5-10 billion. Yesterday the Board of Directors approved NT$91.03 billion to be primarily used for clean rooms, factories, and equipment required to upgrade advanced manufacturing processes. It will also be used for the research and development budget in the fourth quarter and for the recurring capital expenditures budget.

Analysts estimate that next year, TSMC’s revenue from 20 nanometer chips will rapidly rise to 28%, and mass production of 16 nanometer chips will begin in the third quarter. Although the ratio of revenue from 16 nanometer chips will only be in the single digits, revenue from 20 nanometer chips will become TSMC’s main source of profits in the next three years.

Because the manufacturing processes for TSMC’s 16 nanometer chips, in particular, are more efficient and higher-functioning than for the competitors’ 14 nanometer chips, this should enable TSMC to continue to receive orders for processors from Apple in the coming few years. Deutsche securities are also optimistic that TSMC will be able to obtain OEM orders from Apple for the next generation of processors.

(Tr/ Phil Sweeney)