TSMC says it's on track to make third-quarter profit

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電) said it will remain profitable in the third quarter, even as the two largest rivals of the biggest maker of chips on contract expect their losses to widen in the period.

TSMC, whose second-quarter profit fell 98 percent to NT$312 million (US$8.97 million) from a year ago, earlier said the average selling price of its silicon wafers will rise.

"Wafer demand from the second quarter to the third quarter has been increasing," Deputy Chief Executive Tseng Fan-cheng (曾繁城) said in an interview. "More customers have been using our advanced technology."

TSMC rivals United Microelectronics Corp (UMC, 聯電) and Chartered Semiconductor Co (特許) have been slow to use technology that allows more chips to be cut from each silicon wafer, reducing costs.

Both companies posted losses in the second quarter and said the losses would widen in the third quarter as orders declined.

TSMC's current capacity utilization stands at about 40 percent and will rise through the rest of this year, Tseng said.

Closures of chip plants by companies such as Fujitsu Ltd and Motorola Inc are a "good sign" because the chipmakers will need to farm out more of their production when the global economy rebounds, Tseng said.

Still, the global chip market in 2001 will shrink a record 26 percent to US$130 billion from last year as a slowing economy saps demand, according to market researcher IC Insights Inc.

TSMC's plan not to cut staff or close factories worries some investors.

"There has to be a question mark over how long TSMC can be aloof from the carnage," said Steven Barton, who helps manage US$600 million in equities for Abbey National Asset Managers and owns shares in TSMC.

"A lot of people will be looking at their third-quarter earnings to see if the profits are sustainable."

Shares in TSMC rose 0.8 percent to NT$66.5, while UMC rose 0.7 percent to NT$38.7 yesterday.

Chartered Semiconductor most closed at US$4.7, up 0.4 percent yesterday in Singapore.