Taiwan Semiconductor Manufac-turing Corp (TSMC,
To boost the financial transparency of local firms, the government said in May that local companies would have to book employee bonuses as an operational expense, beginning in 2008.
Most electronics companies would suffer a reduction in earnings after implementing the new rule as currently the bonus outlay is not included on company balance sheets, said Rick Hsu (
To cope with the introduction of the new accounting rule, TSMC chairman Morris Chang (
"But, the situation will be different in 2009," Chang said. "The listing of employee bonuses as an expense will cause a reduction in earnings, so we have to adjust the bonus issuance to a level acceptable to our shareholders."
After several months of discussions, the TSMC board decided to allocate 15 percent of its annual earnings as employee bonuses, Chang said in the letter.
Currently, the chipmaker spends 8 percent of the company's distributable profits annually on employee bonuses, typically in the form of half cash dividends and half stock dividends.
Taiwanese electronics firms have been issuing stock dividends rather than giving high salaries to attract and retain talent in recent times, at the expense of shareholder's benefits.
"It is understandable that TSMC would increase employee bonuses in order to retain talent," Hsu said.
He projected that the new accounting rule could erode more than 20 percent of TSMC's annual earnings in the future. But, Hsu said the impact would be relatively mild, compared to chip designer MediaTek Inc (
Under the new accounting rule local firms have to price the stocks issued to employees at market value and then book them as an operational expense.
The company's letter detailing the employee bonus plan was issued after it released its October sales figures. Sales rose 2.4 percent to NT$26.85 billion (US$818.2 million) last month from a year ago, but dropped 0.6 percent from NT$26.86 billion in September, TSMC said in another statement.
For the first 10 months of the year, the company posted revenue of NT$266.8 billion, an increase of 27.3 percent from the year-earlier period, the statement said.
TSMC said revenue for the current quarter would fall about 8 percent to 10 percent from last quarter to between NT$74 billion and NT$76 billion.
Earlier yesterday, Chang forecast that worldwide sales of the semiconductor industry would grow 5 percent to 8 percent next year. He made the forecast during a briefing in Taipei ahead of a scheduled trip to attend the APEC meeting in Vietnam next week.
TSMC shares rose almost 0.5 percent to NT$60.8 on the Taiwan Stock Exchange yesterday. Shares of MediaTek were unchanged at NT$315, while High Tech shares jumped 1.4 percent to NT$780.