Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday posted slightly higher quarterly earnings on rising demand for higher-margin chips and said it planned to pare down its capital spending by 20 percent next year to cope with the latest downturn driven by global economic recession.
Economic weakness, which has stalled electronics demand, may cause annual revenues to decline between 5 percent and 9 percent for the overall semiconductor industry next year, while contract chipmakers may suffer deeper pain, the chipmaker said.
In the quarter ending Sept. 30, TSMC made NT$30.57 billion (US$932 million) in net income, up 0.7 percent from NT$30.37 billion a year earlier, a company statement said. The earnings represented about 6.3 percent quarterly growth, a slower pace than the roughly 25 percent increase in recent years.
“As the global economy drifts into recession, the company’s operation will face more challenges in the upcoming quarters,” chief financial officer Lora Ho (何麗梅) told an investor’s conference yesterday.
To stave off the adverse impact of the crisis, TSMC is considering trimming 20 percent its spending on new equipment next year, from US$1.8 billion this year after a 30-percent cut, Ho said, given growing uncertainty.
“The visibility of the first quarter is low,” chief executive Rick Tsai (蔡力行) said. “Now, we are seeing almost all customers working on inventory adjustments. They are very cautious about placing [new] orders.”
Demand for PCs is expected to drop the most this quarter, despite seasonal demand, Tsai said. Chips used in PCs accounted for a third of TSMC’s revenues of NT$92.98 billion in the July-September quarter.
Shrinking demand across the board may bring TSMC’s revenues down by 26 percent quarter-on-quarter to between NT$69 billion and NT$71 billion in the final quarter of this year, Ho said.
"We had thought inventory on the supply chain would have reduced significantly to a healthier level in the fourth quarter rather than a static situation as Tsai had said," JP Morgan semiconductor analyst Patrick Liao (廖光河) said.
"We are concerned about demand for electronics such as PCs and handsets next year. We are also looking closely at whether TSMC will be able to hold steady chip price, if the downturn lengthens," Liao said.
Gross margin may fall to between 34 percent to 36 percent in the October-December period as factory utilization may decline sharply, Ho said. The figure would be the weakest level in more than five years since the first quarter of 2003.
TSMC's equipment utilization to fall to a relatively low level of 67 percent this quarter and several percentage points next quarter, compared to fully operation over last several quarters, according to a report by JP Morgan release earlier this month.
Responding to speculation about TSMC's acquisition of Singaporean chipmaker Chartered Semiconductor Manufacturing Pte Ltd, Tsai said the company did not have any merger and acquisition plan.
Shares of TSMC climbed for the fourth straight sessions to NT$44.9 yesterday after shedding 19 percent in the third quarter.
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