Asian contract chipmakers will enjoy a better second quarter due to rising demand and disciplined capacity expansion in this seasonally weak quarter, a senior Merrill Lynch analyst said yesterday in Taipei.
"The second quarter is a growth [period] for Asian semiconductor companies," Daniel Heyler, head of Merrill Lynch's Pacific Rim semiconductor research, told a press conference that wrapped up a three-day tech forum.
"Inventory is normal ? Demand for [chips made at] 8-inch fabs is strong. Capacity is tight," said Heyler, further elaborating on the sidelines of the conference.
That would help push up factory utilization to 95 percent during the April-June period from 91 percent in the current quarter, because much of the expected push-outs have been selective, Heyler said in a report dated March 17.
Contract chipmakers also expanded capacity in a more disciplined manner this year than during the last downturn, Heyler said. "The capacity seems to be built based on orders in hand," he said.
Contract chipmakers, led by Taiwan Semiconductor Manufacturing Corp (TSMC, 台積電), are set to spend as much as US$5.6 billion on new equipment this year, up 16 percent from last year, according to the research house's latest survey.
In 2004, investment nearly doubled from the previous year, the survey revealed.
Heyler said he retained a positive and overweight view on the foundry sector, but would remain a little cautious on chip testers and packagers. The positive outlook would also be based on Asian contract chipmakers' low trade multiples, he said.
He gave a "buy" rating for TSMC and United Microelectronics Corp (UMC,
The 12-month price objectives for the world's two biggest contract chipmakers were NT$71 (US$2.2) and NT$22 respectively.
That implies a 19-percent and 16-percent upside respectively from TSMC's closing price of NT$59.6 and UMC's NT$19 on the Taiwan Stock Exchange yesterday.