Taiwan Semiconductor Manufac-turing Co (台積電), the world's largest contract chipmaker, expects sales to increase by 20 percent next year and profits to grow at an even higher rate, Morris Chang (張忠謀), founder and chairman of the company said yesterday.
"Compared to last year, the semiconductor industry this year may drop by around 25 percent, but it could fall even further, perhaps 30 percent," said Chang.
"Next year will be better, [the industry] will grow 20 percent compared to this year ... but the industry will not reach the level it hit last year until 2003," he added. He blamed the decline on the slowing world economy and sluggish demand for chips.
TSMC is the world's largest chip foundry, a company which makes semiconductors based on the designs of its customers, and its chairman is regarded as a the godfather of Taiwan's chip industry.
Analysts, however, did not share his optimism on next year's industry rebound. Pointing out that industry research groups predict a 32 percent plunge in the worldwide chip market from its record high of US$205 billion last year to as low as US$140 billion this year, Deutsche Bank-Taipei semiconductor analyst John Leong said an industry rebound next year will probably not reach 20 percent.
When the recovery does come, however, Leong believes it will be led by demand for communications chips used in mobile phones and infrastructure equipment, with computer chip demand following closely.
To combat the slowdown in semiconductor sales this year, many Taiwanese firms have begun looking to China for relief. TSMC is planning to open a sales office in Shanghai and Chang said the office will be used to prepare further investments there.
He predicted that over the next decade, the core of the chip industry will move to China and that Taiwan should actively assist the transfer in order to help China avoid the mistakes that typically lead to industry-wide slumps.
The global chip industry has undergone seven major slumps over the course of its history due to overproduction and slack demand, particularly as manufacturing moved from the US to Japan, and then from Japan to South Korea, Taiwan and Singapore, said Chang.
Most new industry participants fail to learn this boom-bust industry cycle until after the second slump, but with help from Taiwan, China can avoid the over building that generally leads to these slumps, Chang said.
Analysts say demand for microchips in China will grow by as much as 5 percent year on year in 2001 -- nearly the only place in the world where the demand is expected to grow. The growing electronics industry in China and its huge market are soaking up chips.
In related news, local media reported yesterday that TSMC has decided to delay construction of another 12-inch wafer manufacturing plant in Tainan, southern Taiwan. The current industry slump and other factors led to the decision, according to company chairman Morris Chang.
The resumption of the plants' construction would depend on a rise in chip demand and on the results of a study the firm initiated on the possible effects of vibrations caused by the Taiwan High-Speed Railway, which is presently under construction.
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