Fri, Aug 01, 2008 - Page 12 News List

TSMC sees earnings increase 13%

PROCEED WITH CAUTION As demand for electronics is decreasing, the company trimmed its forecast for revenue growth this year in the semiconductor sector

By Lisa Wang  /  STAFF REPORTER

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday said second-quarter earnings grew almost 13 percent, but that it was cautious about the third quarter as demand for electronics is dwindling in the sluggish global economy.

Reflecting the slowdown, TSMC trimmed its revenue growth forecast again for the overall semiconductor industry for this year to 4 percent from its estimate of 4 percent to 6 percent, made three months ago.

“We expect our business to become weaker in the third quarter ... Demand seems to be going down,” TSMC chief executive Rick Tsai (蔡力行) told investors. “Visibility for the fourth quarter is unclear.”

In the second quarter, TSMC made NT$28.8 billion (US$941 million), or NT$1.12 per share, up 12.9 percent from NT$25.5 billion, or NT$0.96 a share, a year ago, a company statement said.

But the company said growth in the third quarter would not be as strong as in previous quarters as consumers tightened their belts in response to rising oil prices and mounting inflation.

Demand for handset chips may be the weakest in the third quarter, with a single-digit decline in sales, Tsai said.

On July 22, TSMC customer Texas Instruments Inc, the world’s top supplier of mobile phone chips, gave a disappointing forecast for the third quarter.

“Our customers are very cautious about their inventory,” Tsai said. “Again inventory is an issue, but it is in control.”

Because of sliding demand, revenues may grow by 2 percent to 4.4 percent, or between NT$90 billion and NT$92 billion, in the third quarter, from NT$88.1 billion in the second quarter.

“Revenues will grow faster — by 3 percent to 5 percent — in US dollars than in NT dollars. This will unfortunately fall well below our seasonal growth rate over the last five years, which was about 10 percent,” Tsai said.

“The [TSMC] outlook was weaker than I expected. I had thought the company would have forecast revenues to grow 4 percent [in NT dollars] quarter-on-quarter in the third quarter,” said Eric Chen (陳慧明), a semiconductor industry analyst with BNP Paribas Securities.

Indicators such as sluggish consumer demand and slow inventory digestion pointed to negative prospects for the chipmaker, which would deal a blow to its share prices in the near term, Chen said.

The company’s gross margin would rise to between 45 percent and 47 percent this quarter, driven by additional cost reductions, compared with 45.6 percent in the quarter ending June 30, the chipmaker said.

The company’s operating profit margin would rise to between 34 percent and 36 percent this quarter from 34.5 percent last quarter, TSMC said.

But, price pressure is still a problem, Tsai said. Average selling prices for TSMC chips made by every processing technology would not be higher next year than this year, despite the company’s plan to raise its prices, he said.

TSMC retained its capital spending estimate of US$1.8 billion for this year unchanged.

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