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Growth outlook hurts TSMC shares

Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) lost ground on concerns about the company's growth prospects, despite market speculation that the world's largest made-to-order chipmaker may report another record monthly sale today.

TSMC shares closed 1.1 percent lower to NT$43.90 on the Taipei Stock Exchange after a Taipei-based business daily newspaper reported that the company's fourth-quarter sales may lag behind original expectations because of weak demand for chips used in consumer electronics products.

The chipmaker's sales in the final quarter may increase by 5 percent from the third quarter, instead of 8 percent, based on an internal forecast of the company, reports said, citing unidentified employees.

The declining TSMC shares also extended pressure on rival United Microelectronic Corp (UMC, 聯電), forcing the world's second-largest made-to-order chipmaker to close 1.4 percent lower at NT$21.70.

UMC on Tuesday said its revenue rose 64.34 percent to a monthly record of NT$11.51 billion (US$339 million) in August from NT$7.01 billion in the same month last year.

TSMC spokesman Tseng Jin-hao (曾晉皓) declined to comment on the report. He reiterated, however, company Chairman Morris Chang's (張忠謀) comments made in July that the fourth quarter will be better than the third quarter.

Orders for chips used with liquid crystal displays, DVD players and digital cameras have slowed as TSMC's customers cut excess inventory, the report said.

The company's factory use may drop as demand declines and the chipmaker boosts production capacity, the report said.

High-tech bellwether Intel Corp late last week trimmed its third-quarter revenue projection, citing lower than expected demand, especially in consumer electronics.

"Excess inventory is a common theme across the technology industry, forcing companies to cut production and lower prices to spur demand," said Belinda Yu (于蕙玲), head of the fund management department at Jih Sun Securities Investment Trust Co (日盛投信).

TSMC said in July its prices will remain stable in the third quarter and may rise in the fourth as its factories run at capacity for the rest of the year. The company said its third-quarter gross margin, or the percentage of sales left after subtracting production costs, should rise to 45 percent from 43.4 percent in the second quarter.

Worldwide semiconductor sales may peak this year and are expected to fall for the first time in more than five years in 2006, Gartner Inc analyst Philip Koh said in Singapore Tuesday.
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