TSMC sales disappoint

Though Taiwan Semiconductor Manufacturing Co (台積電) announced record monthly sales results yesterday, its stock fell 3.15 percent as investors had been anticipating stronger revenue figures, analysts said.

TSMC, the world's largest contract chipmaker, said in a statement yesterday that September revenue rose 168.4 percent compared to the same period a year ago, reaching NT$16.39 billion.

"I personally believe this is a good number, another record high," said J.H. Tzeng, public relations manager at TSMC.

Revenue for the first nine months of the year came to NT$112.4 billion, up 127.4 percent compared to the same period last year.

But while September sales may have set a new monthly record, revenue was less than 2 percent higher than August's results. The market had been expecting September revenue to surpass NT$16.50 billion.

TSMC's share price yesterday fell NT$3.50 to NT$107.50, or 3.15 percent -- nearly the 3.5 percent daily-down limit.

The normal daily downward limit is 7 percent, which was temporarily modified last week after Tang Fei (唐飛) stepped down as premier.

"The results were a little lower than expected because of the VIA problem," said Peter Wang, an analyst at Fubon Securities Co, referring to the world's second-largest chipset designer.

"VIA had originally been very optimistic about chipset orders, but in September its orders to TSMC were lower than expected," he said.

VIA is one of TSMC's major customers. The company reported last week that September revenue was more than 250 percent compared with the same month a year ago, but fell 7 percent month on month to NT$3.53 billion.

In addition to reduced orders from major customers, analysts said, TSMC may be using less production capacity and suffering from a less profitable product mix.

K.C. Chen, senior vice president of TSMC, said in a statement yesterday that the company's capacity remained full. The firm was continuing to expand capacity aggressively to meet demand, she said.

But while sales may still be growing as the company expands capacity, there are signs that TSMC may be using less capacity than in previous months.

Fabless integrated circuit design companies are finding it easier to ask for capacity allocation, said Jessica Chang, semiconductor analyst at Nomura International. "Two to three months ago, they had difficulty asking for more capacity," she said.

Their ability to obtain capacity allocation suggests a fall in TSMC's capacity utilization rate.

"A small decline in the utilization ratio might affect the degree by which TSMC is able to ask for a higher average selling price," Chang said. "The company says it's been raising its average selling price, but I think they've been under pressure not to increase the price," she said.

TSMC's revenues may also be suffering from a less profitable product mix, analysts said.

"Some communications companies pulled out some orders from TSMC," said Andrew Teng, semiconductor analyst at Taiwan International Securities Corp.

TSMC said in August that Motorola Inc, the world's No. 2 cellular phone maker, had scaled back estimates of potential future order volumes because of lower than expected demand.

Communications chips have higher profit margins than PC chips, Teng said. As a result, revenue growth will rise more slowly. "Even though TSMC is running at 100 percent capacity, the product mix has changed, which pulls down the gross margin," he said.