TSMC Lowers Guidance for 1Q19 Due to Unexpected Defects

According to DigiTimes, the Taiwan Semiconductor Manufacturing Company (TSMC) has revised its first-quarter 2019 guidance downward after it recently found some unexpected defects in its chip wafers.

A Bad Batch of Materials

TSMC said that the defects were due to a problematic batch of a photoresist material that contained a specific component that was abnormally treated by a chemical supplier. The treatment created a foreign polymer in the photoresist material that affected 12/16nm wafers at TSMC’s Fab 14B.

To protect its customers, TSMC removed a higher number of defective wafers than expected when it first learned about the problematic batch. The company expects the incident to reduce TSMC’s revenues for the first quarter by $550 million. However, the company expects to recuperate the loss in the second quarter.

The company has also moved some Q2 production into Q1. Therefore, the $550 million loss in the first quarter due to the bad batch is expected to be offset somewhat by an additional $230 million in revenue that was initially expected in Q2.

Slight Revenue Miss for the Year

TSMC has reached out to the customers affected by the reduced wafer production in the first quarter and said that it had reached an agreement with them for replacement chips. It has also assigned new delivery schedules.

For the whole of 2019, TSMC is expecting to see slightly lower gross and operating margins (-0.2p each), as well as earnings per share (EP), due to this incident (-$0.08).