This Apple Supplier Is Doing Better Than Some Expected

BlueFin Research Partners’ Steve Mullane said that Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE: TSM) 16nm is surging, led by Apple Inc. (NASDAQ: AAPL), and this could benefit 3Q revenues, while not having an impact on 2Q.

The company’s Q1 supplier forecasts have increased modestly, and are now on track to growing marginally over 1 percent sequentially, analyst Steve Mullane mentioned. He added, “In the biggest evidence yet that SoC inventories have been depleted, our first detailed look at Q2 forecasts indicate that suppliers with healthy consumer exposure are ramping production in April.”

TSM 16nm

The surge in 16nm production is the main reason for the double-digit sequential growth projected for Q2, Mullane commented. He added that 16nm wafer start increases comprise more than 50 percent of the growth in Q2.

Apple’s A9 wafer starts are estimated to have declined from about 28K wpm in Q4 to 15K wpm in Q1, and subsequently the A10 ramp in Q2 increased to over 30K wpm. The analyst expects A10 production to exceed 50K wpm in June, which is higher than the 20nm A8 ramp in 2014, and “a validation that TSM has 100% of the A10 business.”

Mullane estimated Taiwan Semiconductor’s 16nm production to exceed 60K wpm in Q2, increasing more than 100 percent from the Q1 levels. He further mentioned, “Note that while Q2 16nm wafer starts are very strong, they will not largely impact revenues until Q3 due to the extended cycle time through fab.”

The BlueFin Research Partners report added that 16/20nm revenues are expected to decline sequentially in 2Q due to the sharp decline in Q1 wafer starts.