Fri, Oct 14, 2011 - Page 12 News List

TSMC chairman bearish on economy

DOWNTREND:Morris Chang said it could take the semiconductor industry longer to recover than he expected given a deteriorating global economic environment

By Lisa Wang  /  Staff Reporter

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman and CEO Morris Chang (張忠謀) gave a bearish outlook about the world economy as US and European nations were struggling to stimulate growth and to resolve debt crisis, casting a shadow on the pickup of semiconductor industry.

Speaking at an awards ceremony late on Wednesday, Chang said US economy would not recover until 2013 and that Europe was facing a far more serious debt problem than previously believed. Chang's speech was seen in a video clip posted on the Web site of the event's organizer CommonWealth magazine.

This could mean a bumpier road ahead for the semiconductor industry and it could take longer to recover than he had originally estimated as economic slowdown could reduce demand for chips used in electronics from PCs, TVs to handsets.

In August, Chang said he expected inventories to fall to normal levels this quarter and that this would lead to a rebound in TSMC’s factory utilization.

Chang’s speech on Wednesday briefly rocked semiconductor stocks yesterday. The semiconductor sub-index dipped nearly 1.5 percent in the first hour-and-half of trading before regaining strength in the afternoon session. At the end of Taipei trading, the sub-index closed up 0.28 percent, underperforming the benchmark index, which advanced 0.62 percent.

Bolstered by its strong fundamentals, TSMC, the world’s biggest contract chipmaker, saw its shares unchanged at NT$70.40. Rival United Microelectronics Corp’s (UMC, 聯電) stock price tumbled 1.65 percent to NT$11.95 after Barclays Capital analyst Andrew Lu (陸行之) forecast that the firm would fall into red this quarter at the earliest because of overcapacity and order cuts from customers.

TSMC’s utilization could fall to 85 percent this quarter and to 81 percent next quarter from 91 percent last quarter, Lu said.

In the speech, Chang also said that this time, China would not be able to play a key role in supporting the global economy as it did when the last financial crisis erupted in 2008, because Beijing was grappling with high inflationary risks, which it may have to contain at the expense of economic growth.

As an export-oriented economy, Taiwan is vulnerable to changes in the world economy and would certainly be affected by a slowdown in the US, Europe, Japan and China, he said.

In August, Chang trimmed his forecast for global revenue growth for semiconductors (excluding memory chips) this year to 4 percent, from his prior estimate of a 7 percent increase, citing weaker-than-expected global economic growth.

Market researcher Gartner Inc has predicted that global semiconductor firms’ revenues would slide 0.1 percent to US$299.12 million this year from last year’s US$299.37 million before returning to an annual growth of 4.6 percent next year.

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