Sat, Mar 28, 2009 - Page 12 News List

Chip industry to contract at slower pace, TSMC says

By Joyce Huang and Lisa Wang  /  STAFF REPORTERS

The anticipated decline in the global semiconductor industry will likely ease, contracting by less than 30 percent this year, which Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) had predicted in January, its founder Morris Chang (張忠謀) said yesterday.

“We’ve seen improving signs not just in the semiconductor sector, but also the flat-panel and information technology industries,” Chang said on the sidelines of a business summit.

He said that he expected the world economy to return to last year’s growth level of 3.7 percent next year and the US economy to return to last year’s level of 1.4 percent by 2011 at the earliest.

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He also said he expected the local economy to hit bottom in the second half of this year, although a full recovery would only arrive when the US economy rebounds.

The world’s largest contract chipmaker said last week it planned to end its policy of forced unpaid leave for employees starting next month to cope with increasing orders.

“I hope that we [TSMC] will never have to ask employees to take unpaid leave again,” Chang said.

Ahead of Chang’s optimistic outlook, Credit Suisse on Thursday slightly raised its earnings forecast for TSMC this year and next year on the back of rebounding orders from customers in almost all sectors to cope with a buildup in demand.

TSMC said earlier that the weakening NT dollar and rising demand for digital TVs and third-generation (3G) mobile phones in China might drive up revenues.

Credit Suisse analyst Randy Abrams said those positive signs strengthened his belief that the first quarter may be the worst period for TSMC in terms of profitability.

“We believe TSMC has room to continue growth towards 70 percent utilization in the second half and to approach end-consumption once inventory resets to the lower levels,” Abrams said in a report, which compares positively to a projected 35 percent utilization rate this quarter.

Abrams raised his forecast for TSMC’s second quarter revenues, which may grow by 37 percent quarter-on-quarter rather than 25-percent as estimated earlier.

UNCERTAIN

But the chipmaker’s medium-term trends are still uncertain because of a huge macro overhang, the report said.

Abrams raised his earnings forecast for TSMC to NT$36.39 billion (US$1.08 billion) this year, from a previous estimate of NT$36.08 billion.

Next year, TSMC may earn NT$76.83 billion rather than NT$74.93 billion, he said.

Credit Suisse reiterated its “out-performing” rating on TSMC stock and raised its target price to NT$58 from NT$56, implying an 11.76 percent upside from the stock’s closing price of NT$51.9 yesterday.

“While we are encouraged by long-term positioning, we get less aggressive as momentum is priced in and risk of a later-year dip lingers,” Abrams said.

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