Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電) said yesterday that second quarter earnings soared 85 percent thanks to stronger-than-expected demand for consumer electronics such as game consoles, but warned that unresolved inventory problems could weaken its performance this quarter.
The world's top contract chipmaker yesterday posted NT$34 billion (US$1.04 billion), or NT$1.32 per share, in consolidated net income for the quarter ended last month, compared with NT$18.37 billion, or NT$0.71 a share, a year ago. That represented quarterly growth of 4.3 percent.
"[Growth was] driven primarily by stronger demand from our customers in the communications and consumer segments," TSMC spokeswoman Lora Ho (何麗梅) said.
Looking ahead, TSMC expected revenues to drop about 2 percent to between NT$79 billion and NT$80 billion in the current quarter, from NT$82.12 billion last quarter, amid sluggish demand for computers and stable demand for communications devices and consumer electronics.
"This outlook indicates that the inventory problem is real," chief executive and president Rick Tsai (
However, TSMC did not plan to slow its investment in advanced technologies as the lull in the market would be shorter and milder than that experienced in 2004, Tsai said.
This confidence was a result of its customers' increased sensitivity to inventory levels, Tsai said, adding that customers were trying to reduce inventory through the fourth quarter.
"We will be able to secure profitability and factory utilization during industrial troughs," Tsai said.
TSMC expected gross margin to remain stable at between 49 percent and 50 percent, compared to 51.8 percent last quarter.
Capital expenditure for this year would remain unchanged at between US$2.6 billion and US$2.8 billion and TSMC would continue to build capacity next year to meet customers' demand, Tsai said.
Inventory buildup among its customers prompted TSMC to trim its forecast for overall semiconductor growth for this year to 8 percent in annual revenues, from an earlier estimate of between 8 percent and 12 percent.
"However, 2007 will be a good, profitable year for the semiconductor industry. The growth rate for the industry will be similar to this year at about 8 to 9 percent annually," Tsai said.
Because of its upbeat long-term outlook, the chipmaker would continue to boost output by 10.74 percent in the second half of this year to 3.71 million 8-inch wafers, compared with 3.35 million wafers in the first six months.
"The positive outlook for the third quarter is pretty much in line with my expectation -- no big surprise," said Eric Chen (
TSMC's second-quarter earnings slightly exceeded Chen's estimate of NT$1.3 a share.
"Our concern now is whether the chip backlog will be depleted by the fourth quarter," Chen said.
Chen reiterated his "buy" rating on TSMC with a target price of NT$80, which implies a 47.6 percent upside from the stock's closing price of NT$54.2 yesterday on the Taiwan Stock Exchange.
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