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TSMC reports expansion in revenues

Taiwan Semiconductor Manufacturing Co CEO Rick Tsai smiles as he looks at a colleague during a third quarter press conference yesterday in Taipei. PHOTO: CHIANG YING-YING, AP

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電), the world's largest made-to-order chipmaker, reported growth in revenue for the third quarter from the previous quarter on increased wafer shipments, according to company executives yesterday.

"The growth in the third quarter was mainly driven by strong wafer demand generated by communication and consumer electronics products, including mobile phones, game consoles and DVD players," Lora Ho (何麗梅), TSMC's vice president and chief financial officer, said at an investor conference.

TSMC's net income stood at NT$24.49 billion, up 33.3 percent from the previous quarter but down 12.3 percent year-on-year. Net sales hit NT$69.26 billion in the third quarter, growing 18.4 percent from the previous quarter but dropping 0.7 percent from a year earlier, according to the company.

Gross margin for the July to September period jumped 4.4 percentage points to 44.1 percent, on higher levels of factory use and a favorable exchange rate, Ho said.

TSMC's factory utilization rate reached 96 percent in the third quarter, rising from 85 percent in the second. The company expects the ratio to rise to about 100 percent in the last quarter of the year, she added.

The firm's fourth-quarter results are set to beat the third quarter's, on rising orders -- especially for personal computers, wireless and wired equipment, as well as communication and consumer electronics, chief executive and president Rick Tsai (蔡力行) said.

Fourth-quarter revenues will grow to between NT$77 billion and NT$79 billion, with gross margin up to 47 percent to 49 percent, the company said.

Analysts were not surprised by TSMC's third-quarter results.

"Third-quarter earnings were pretty much within expectations. What shocked me slightly was its better gross profit, probably boosted by shipments of wafers that used advanced process technologies," said James Hung (洪雅彬), executive vice president of Bowa Successful Asset Management Co (寶華成豐投信).

The company's fourth-quarter outlook was not as gloomy as industry watchers had expected, which indicates that demand for computers, communication and consumer products will be strong, he added.

According to Ho, the sales contribution from wafer shipments using the 90-nanometer advanced process technology increased to 10 percent in the third quarter from 2 percent in the second.

"Competition in the 90-nanometer field is fierce as a result of pricing pressure. It affects our profitability, but TSMC will maintain its leading position and not give up market share," Tsai said.

Shares of TSMC closed down 2.4 percent to NT$49.60 before the company released its third-quarter results. Rival United Microelectronics Corp (UMC, 聯電), however, fell by the daily maximum of 7 percent to NT$17.35 after reporting on Wednesday an 80 percent drop in July-September net income, to NT$2.17 billion, from a year ago.

While UMC's results were viewed as being in line with expectations, market watchers expressed concerns over UMC's gross margin. The chipmaker reported gross margin for the third quarter of 12.5 percent.

Analysts including Daniel Heyler at Merrill Lynch had predicted 14.6 percent gross margin, Bloomberg reported yesterday.

To "reflect a slower margin recovery," Heyler reduced his profit forecast for the company for next year to NT$21.3 billion from NT$23 billion, the report said.
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