Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) said on Saturday that while the financial crisis has not yet ended, the economic crisis has already begun. He said the depth and duration of the economic recession remained unknown.
Chang said the company would face hard times beginning in the fourth quarter.
“But we will hunker down and weather the global economic storm,” he said.
Chang made the statement during the company’s annual sports event in Hsinchu.
During his opening speech, Chang told employees that TSMC’s business performance in the first three quarters of this year had been decent. And despite the impact after the new policy of expensing employees bonus stocks, it is expected that TSMC’s bonus distribution next year would still top the list among Taiwanese companies.
At its investors conference on Thursday, TSMC, the world’s largest made-to-order chipmaker, reported a net profit of NT$87.48 billion (US$2.65 billion) in the first three quarters of this year, top among companies listed on the Taiwan Stock Exchange. Earnings per share were NT$3.34 during this period.
In the third quarter, TSMC posted a net profit of NT$30.57 billion, compared with NT$30.37 billion a year earlier.
But the company told investors its revenue in the fourth quarter would drop to between NT$69 billion and NT$71 billion, about 25 percent lower than the NT$92.98 billion it reported in the third quarter. TSMC also said it would cut capital expenditures by about 20 percent next year.
Against this backdrop, Chang said on Saturday that following the global economic turmoil, TSMC would step into a “rather harsh period” beginning in the fourth quarter.
Nonetheless, Chang told employees he has faith that the 21-year-old company would survive the harsh economic times and become a better and stronger company as a result.
TSMC chief executive Rick Tsai (蔡力行) said the company would strive to control costs and reduce its capital expenditures next year. Despite this, TSMC would continue to strengthen its research and development capabilities, he said.
Chang described the economic slowdown as an “economic tragedy” that has affected people around the world.
“The economic crisis has already begun,” Chang said, adding he has no clue about its depth and duration.
As for TSMC, “the duration of the current economic slowdown would be longer than the crisis in 2001,” he said.
Regarding concerns about whether the economic slowdown would be a replay of the 1930s Great Depression, Chang said it was unlikely because unlike then-US president Franklin D. Roosevelt, who did not take new measures to stimulate the battered US economy until many years later, governments in the US, Europe and Japan have reacted quickly to the current financial crisis. [Editor’s note: FDR was not elected president until 1932.]
Chang also said that Taiwanese companies have a low awareness of the economic slowdown, adding that the dynamic random access memory (DRAM) industry was a perfect example.
As to whether the government should bail out the DRAM industry, which is suffering from declining prices, Chang said: “It is debatable. Plus, it has not reached that level.”
ADDITIONAL REPORTING BY STAFF WRITER
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