Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, yesterday posted its best quarterly earnings in a year and said it expected growth to continue this quarter, bolstered by a faster-than-expected rebound in demand for chips, especially for computers.
TSMC chairman Morris Chang (張忠謀) told investors that the chipmaker had set a five-year target to increase earnings per share by 10 percent annually starting in 2011.
TSMC again raised its capital spending for this year to US$2.7 billion, up 17 percent from the US$2.3 billion it projected three months ago. The new target will be its most aggressive expenditure over the past 10 years.
“Why do we increase capital spending? It’s to seek growth,” Chang said. “We fully intend this year’s capital spending to precede [profit] growth [by two quarters].”
Next year would be a record year in terms of revenues and profits, Chang said.
That would be riding on faster recovery of the overall semiconductor industry.
Chang raised his projection on the chip market, which is expected to grow 10 percent annually by revenue, up from his estimate of 5 percent made three months ago.
Contract chipmakers would outpace industry growth, he said.
During the third quarter, TSMC’s net income edged down slightly to NT$30.55 billion (US$939.1 million), from NT$30.57 billion a year ago. On a quarterly basis, third-quarter earnings jumped 25 percent from NT$24.44 billion in the second quarter, thanks to improving end demand for computers, handsets and consumer electronics.
This quarter, TSMC said revenues could reach between NT$90 billion and NT$92 billion, which would represent growth of up to 2.3 percent, from NT$89.94 billion in the third quarter. That would beat most analysts’ expectation that TSMC’s revenue would fall slightly or hold steady.
“The fourth quarter will be better than [the] seasonal [high]. Usually, we will worry about inventory pileup at the end of an up-cycle, but we haven’t seen that happen [this time]. That could mean the upcycle has not ended yet,” said Steven Pelayo, a semiconductor analyst with HSBC Securities.
TSMC said customer inventory appeared to be lean at the end of the third quarter. It expected end demand from the PC segment to be the strongest, followed by communications, this quarter.
In other words, TSMC may land more orders for PC graphics chips from US graphics makers Nvidia Corp and ATI, which made up about 5 percent of TSMC’s overall revenue, Pelayo said.
Gross margin is expected to rise to between 47 percent and 48.5 percent this quarter, from 47.7 percent last quarter, TSMC forecast.
Its operating margin is also expected to improve further to between 35.5 percent and 37 percent this quarter, from 35.6 percent last quarter.
Shares of TSMC fell 0.33 percent to NT$60.3 yesterday, outperforming the benchmark TAIEX, which declined 2.37 percent.
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