Taiwan Semiconductor Manufacturing Company (TSMC) expects to report record revenues of between NT$254 billion (US$7.95 billion) and NT$257 billion for the third quarter of 2016, which will represent sequential growth of 14.5-16%.

TSMC saw its second-quarter revenues increase 9% on quarter to NT$221.81 billion, which also beat the company's guidance of NT$215-218 billion.

"Second quarter results exceeded the high end of our guidance given three months earlier mainly due to demand increases in mid- and low-end smartphone segments and customer inventory restocking," said TSMC CFO Lora Ho in a statement. "We expect our business in the third quarter will benefit from new product launches by major mobile device customers as well as continued inventory restocking by our customers."

TSMC expects its third-quarter gross margin to be between 50% and 52% compared with 51.5% in the second quarter, while operating margin will be 39.5-41.5% compared with 41.2% in the prior quarter.

Looking into the fourth quarter, TSMC warned of inventory adjustments among its clients. DOI at fabless firms should return to seasonal levels at the year-end, the foundry said.

TSMC's target of 5-10% growth in 2016 consolidated revenues remains unchanged, according to the foundry.

TSMC also revised upward its capex target for 2016 to US$9.5-10.5 billion to respond to robost mobile device demand. The foundry previously estimated 2016 capex would be US$9-10 billion.

In addition, TSMC's 10nm process has received product tape-outs from three clients, company co-CEO Mark Liu disclosed. More tape-outs are expected to land by the end of 2016, and TSMC's 10nm process will start generating revenues in the first quarter of 2017, Liu said.