Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's No. 1 contract chipmaker, yesterday said third-quarter earnings hit a record high, but forecast gloomy prospects for the industry, citing prolonged inventory digestion.
The global semiconductor industry is expected to remain almost flat next year in terms of sales, chairman Morris Chang (張忠謀) told investors.
But TSMC will still have positive growth, he added.
"The market actually is changing. Now I'm holding a relatively pessimistic view for the full year of 2005, compared to three months ago," Chang said.
TSMC's capital expenditures for next year could fall by around 10 percent, from US$2.4 billion planned for this year, which is a reverse from his projection of a mild increase in July, he said.
In the three-month period to September, TSMC's earnings rose to NT$27.93 billion, or NT$1.2 a share, on record revenue of NT$69.74 billion. The result represented an 84 percent expansion from NT$15.17 billion, or NT$0.65 per share, a year earlier.
But, a sustained strong performance is unlikely as demand is expected to dwindle due to high inventory in supply channels.
TSMC's revenue will decline slightly in the fourth quarter, versus the previous three months, company spokesman Lora Ho (
"End demand from all segments will go down as the consumer [area] falls mostly because inventory built up in the supply channel in the second quarter needs [more time] to be digested," Ho said.
As a result, wafer shipments are expected to drop by a single-digit percentage point, which will bring the utilization rate down to about 86 percent, according to the chipmaker.
The company's projection for factory usage caught investors' attention as the figure is well below the market consensus of 95 percent. TSMC's facilities were fully loaded in the last several quarters.
Bhavin Shah, a technology analyst with JP Morgan Securities (Asia Pacific) Ltd, said it was a shock.
Lower factory usage and decreasing spending on new equipment pointed to the long-run worry that the industry has started to decline from the peak, Shah said.
Dan Heyler, head of Merrill Lynch Ltd's Asia Pacific Semiconductor Research, however, said he was not surprised as inventory is still pretty high.
"Inventory will need several quarters to go back to normalcy, probably in the second half of next year," Heyler said.
Despite the drastic correction, Bill Lan (
TSMC shares have plunged 35 percent to NT$42.2 since the beginning on the benchmark Taiwan Stock Exchange.
Despite the drastic correction, Bill Lan (藍新仁), a portfolio fund mangewith Jih Sun Securities Investment Trust Co (日盛投信), said that “the proper timing to buy TSMC stocks is still quarters away.”
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