Thu, Nov 10, 2005 - Page 11 News List

TSMC sales hit record high of NT$26.2 billion

INDUSTRY LEADER Although the semiconductor foundry sector is intensely competitive, TSMC has been able to increase its advantage over competitors

STAFF WRITER , WITH AGENCIES

The world's largest supplier of made-to-order chips, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), yesterday said sales rose 14.2 percent to a record of NT$26.2 billion (US$778 million) last month, according to a company statement.

The figure marked a 4 percent rise from NT$25.23 billion two months ago.

"Due to continued demand recovery from our customers, wafer shipments for October 2005 increased over September 2005," company vice president and chief financial officer Lora Ho (何麗梅) said in a statement.

Sales in the 10 months to last month fell to NT$209.65 billion from NT$215.09 billion in the same period last year, the statement read.

Shares of TSMC rose by 1.47 percent to close at NT$55.30 on the Taiwan Stock Exchange yesterday. The company released its sales report after the stock market closed. Rival United Microelectronics Corp (聯電) closed up 3.81 percent at NT$17.75 as it reported on Tuesday that its sales last month rose to NT$9.04 billion from NT$8.50 billion in September.

Taiwan Ratings Corp (中華信評) yesterday affirmed its "twAAA" corporate credit rating and unsecured corporate bond issue rating on TSMC, with a stable outlook.

"The ratings reflect TSMC's dominant market position in the global semiconductor foundry sector, advanced technology capability, high manufacturing efficiency, and solid customer base," Taiwan Ratings said in a statement.

TSMC's strong business position is underpinned by a market share of around 50 percent of the global semiconductor foundry sector, which is significantly larger than that of its rivals.

"The ratings also reflect TSMC's very strong profitability and cash flow, abundant liquidity, and very low leverage," the statement added.

The Semiconductor Industry Association, a San Jose, California-based trade group, predicts worldwide chip sales will gain 8.8 percent next year, from a 6 percent pace projected for this year. Last year, global chip sales rose 28 percent to US$213 billion.

Although the semiconductor foundry sector is highly cyclical and intensely competitive, Taiwan Ratings said TSMC has been able to widen the distance between itself and its competitors.

This is reflected in TSMC's very high gross margin, which averaged 41 percent in the first three quarters of this year and is expected to reach 47-49 percent in the fourth quarter. This is significantly higher than its competitors' average gross margin of less than 20 percent. Major factors contributing toward TSMC's high margin are its low manufacturing costs, which result in a lower breakeven level, and better product mix with more products using advanced technologies (0.13-micron and below), which garner higher selling prices.

On Tuesday, for instance, TSMC's board approved capital spending of US$706.5 million for expansion as the company will use the money to increase capacity of the company's 12-inch plants' 65 nanometer process, and its 8-inch plants' 0.18-micron and 0.15-micron processes.

Moreover, TSMC has very strong profitability, according to Taiwan Ratings.

The chipmaker reported record-high revenues of NT$256 billion last year, while net income reached NT$92.3 billion. Revenues are expected to reach new record highs of more than NT$260 billion this year, while net income is projected at around NT$92 billion.

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