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TSMC raises profit forecast

Taiwan Semiconductor Manufac-turing Corp (TSMC, 台積電), the biggest maker of chips for other companies, raised its profit forecast for the full year by a fifth on rising sales of chips.

"Trends in the semiconductor industry changed swiftly over the course of the year, with TSMC realizing a substantial increase in customer orders starting in early October," said Chen Kuo-tzu (陳國慈), senior vice president of TSMC.

Demand is so strong right now that TSMC will have to reopen production lines that were mothballed earlier this year due to the chip industry slump, she said.

Profit this year will reach NT$13.2 billion (US$383 million), or NT$0.76 a share, compared with an earlier target in September of NT$11 billion, or NT$0.63 a share, the company said in a statement.

TSMC stayed profitable this year while rivals United Microelectronics Corp (UMC, 聯電) and Chartered Semiconductor Manufacturing Ltd (特許) turned to losses amid the worst slump in chip industry history.

TSMC maintained profits as it has better production technology than its rivals that allows customers to cut costs, some investors said.

"Next year will be better than this year," said Bryan Chiang, who counts shares in TSMC among the NT$1.5 billion he helps manage at Invesco Taiwan Ltd. "More orders are coming from PC and communications chip customers."

Sales for the entire year will reach NT$125.6 billion, compared with NT$166 billion a year ago, the company said.

Revenue in the first three months of next year will grow at a double-digit rate from NT$32.8 billion in the fourth quarter, said Julie Chang, a TSMC investor relations manager, citing a Credit Suisse First Boston presentation by Chief Financial Officer Harvey Chang (張孝威).

TSMC, which is using less than half of its equipment as a result of the chip slump, improved net income in the third quarter after customers fully booked its most advanced production technology, some analysts said.

"Most of chipmakers' growth comes from leading-edge capacity," said Dan Hutcheson, the principal analyst of market researcher VLSI Research Inc, at a chip-industry conference in Taiwan yesterday.

Chip sales will increase 23 percent next year on rising demand and the decline in prices will end, he said.

Last week, TSMC said use of production capacity that fetches the highest profit margins is rising. TSMC is getting more orders from computer chip designers Nvidia Corp and ATI Technologies, two of its biggest customers, some investors said earlier.

Shares in TSMC rose NT$4.5, or 6.2 percent yesterday, to NT$77.5.
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