Taipei, June 12 (CNA) The chairman of Taiwan Semiconductor Manufacturing Co. (TSMC) said Tuesday that the supply of chips on the advanced 28 nanometer process is expected to continue to fail to meet market demand in the third quarter of this year.
In an annual general meeting held in Hsinchu, northern Taiwan, Chang said that after TSMC's efforts in production expansion, supply of 28 nm chips is expected to come closer to market demand in the fourth quarter, while market demand is likely to be satisfied in 2013.
He said TSMC failed to come up with an accurate forecast about the global demand for the chips so that the company did not expand its production capacity as soon as needed.
In late April, TSMC revised upward its capital expenditure plan for 2012 to a range of US$8 billion-US$8.5 billion (NT$240 billion-NT$255 billion), up more than 33 percent from the previously planned US$6 billion.
In the first quarter, TSMC, the world's largest contract chip maker, witnessed its net profit rise 6 percent from a quarter earlier on the back of strong demand for mobile devices such as smartphones and tablet computers.
During the January-March period, chips using the 28 nm process accounted for 5 percent of TSMC's total sales, a ratio that is expected to rise to more than 20 percent in the fourth quarter, according to TSMC.
Meanwhile, Chang said TSMC has also been developing 18-inch wafers but is still in an early stage for this technology, adding that he expects the company to face many challenges before the development is commercialized.
According to Chang, TSMC is one of the three chip makers in the world to step into 18-inch wafer development. The two others are U.S.-based Intel Corp. and South Korea's Samsung Electronics Co.
In a shareholder meeting, TSMC Chief Financial Officer Lora Ho said the electricity rate hikes that went into effect June 10 are expected to impact the company's bottom line for the second half of this year.
Ho said she expects the rising electricity rates to drag down TSMC's gross margin by 0.3-0.4 percentage points per quarter.
In the first quarter, TSMC's gross margin stood at 44.7 percent, higher than the company's earlier estimate of 42.5-44.5 percent. The second quarter gross margin is expected to range between 47 and 49 percent, according to TSMC.
(By Jackson Chang and Frances Huang)