TSMC says its capacity usage is up

A Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電) spoke-sman yesterday confirmed a report in the local media that the company's utilization rate could hit 80 percent by the end of the year.

That report quoted TSMC chairman Morris Chang (張忠謀) -- speaking at a seminar in Singapore on Monday -- as saying its utilization rate, which measures the number of production lines in use, reached 50 percent during the fourth business quarter and will rise to between 70 and 80 percent by the end of the year.

Six months ago, plummeting orders for its microchip production services prompted TSMC to mothball over half of its production lines. Sales had plummeted by 98 percent compared to the previous year and the firm barely skirted a second quarter loss by cashing in on a government tax rebate.

But after computer sales surged ahead of the holiday season, TSMC started up more of its unused chip lines, operating half of its lines by the end of the fourth quarter. Now, the company believes the good times will continue, and expects nearly three-quarters of all its manufacturing lines to be back in operation by the end of the year -- including new ones currently under construction.

"A 70 percent utilization rate is very high. Morris Chang must have a very positive outlook for next year," said Henry Wang, an electronics industry analyst at Entrust Securities Co (永昌證券) in Taipei.

Some of the utilization-rate increase will come from plant closures and consolidation, Wang said. He said TSMC may soon merge two manufacturing facilities as well as close operations at Fab 1, which is located at the Industrial Technology Research Institute (工研院). He also said that new plants coming on line will increase capacity, with a state-of-the-art 12-inch wafer fab scheduled to open later this year in Tainan.

Last year, the company spent US$2.2 billion to increase its output potential by over 1 million silicon wafers, the raw material upon which semiconductors are etched. At the end of last year TSMC had enough production lines to produce 4.4 million wafers a year.

TSMC's net sales in December reached NT$11.8 billion (US$337 million), a 6.1 percent rise over November and the sixth straight monthly sales increase. The downturn took its toll on TSMC, however, as total sales for last year came in at NT$125.9 billion, down 24.3 percent compared to the previous year.

This year, TSMC expects sales to increase by 20 percent, according to statements made by Chang last September.

According to a report from Dataquest, the fourth quarter last year marked a turnaround for the chip foundry industry. Rising orders should push the utilization rate of firms like TSMC and rival United Microelectronics Corp (聯電) above 65 percent -- and as high as 80 percent -- in the fourth quarter, similar to Chang's prediction.