September 5, 2007 – TSMC’s wafer shipments are now on pace for about 18% growth in 3Q07 and another 5% in 4Q, and sales should be on the rise as well, as customers in the computing/consumer sector start to pull in shipments, according to one analyst’s take.

Despite initially setting a “conservative” outlook due to ASP erosion and sell-through uncertainties, TSMC is now seeing an 18% Q-Q increase in wafer shipments, with “healthy” channel inventories, writes FBR Research senior VP Mehdi Hosseini, in a research note. “Since sell-through has so far remained good, we believe that TSMC’s customers have over the past 4-6 weeks continued to ask for earlier than previously expected wafer shipment,” he notes. Additionally, current trends of six-week average lead times suggest 5% Q-Q growth in 4Q wafer shipments, above expectations of 3%, he said.

The improved wafer shipment trends also bode well for equipment suppliers, Hosseini noted — particularly ASML, with expected immersion-related “capacity” orders seen coming in later this year, combined with the triggering of an option program that the firm has with its foundry customers.

Driving the growth is a strong build in the PC sector as well as consumer products, e.g., digital/LCD TV, set-top boxes, and DVDs, Hosseini writes. There is “uncertainty” in the wireless communications segment, though, with weaker order trends believed to be coming in from Texas Instruments (which is losing share in handsets), and slower shipments/starts to Freescale due to uncertainties with Motorola’s market position.

Hosseini also notes that while there has been “confusion” trying to tie TSMC’s technology migration to its capital spending plans, he thinks that 65nm tapeouts have increased to over 50 (with volume ramp in 2008), and several 45nm tapeouts for wireless and high-end CPU are also slated to ramp in the next year. “A large number of deposition/etch equipment could be shared between 90nm and 65nm, limiting capital intensity increases from 90nm to 65nm, but the same approach cannot be applied to 45nm, leading to increased capital intensity, at 45nm,” he points out.