Fri, Jul 20, 2012 - Page 13 News List

Despite strong Q2, TSMC cuts forecast

REALISTIC:The chipmaker was under no illusions from its high profits that its growth would not be affected by the economic downturn in major markets like the EU

By Lisa Wang  /  Staff reporter

Taiwan Semiconductor Manufacturing Co (TSMC) chairman and CEO Morris Chang speaks during TSMC’s second quarter earnings conference in Taipei yesterday.

Photo: Reuters

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday posted its best quarterly net profits in six quarters on strong chip demand from all product segments such as smartphones.

However, the world’s top contract chipmaker warned that inventory correction and a deteriorating global economy would stall revenue growth for two quarters starting next quarter.

Because of lackluster economic outlooks for the company’s major markets in the US, Europe and China, TSMC chairman and CEO Morris Chang (張忠謀) yesterday trimmed his forecast for overall semiconductor industry revenue growth to between 1 percent and 2 percent, from more than 2 percent three months ago.

Days in inventory in the supply chain is expected to rise to 10 days above the seasonal norm this quarter and to drop slightly to eight days at the end of this year, compared with three days higher than the seasonal pattern at the end of last quarter, he said.

“We are now seeing a dip in our revenue in the fourth quarter from the third quarter ... I think it will be a plunge far more modest than that [in the fourth quarter of 2008],” Chang said.

A strong rebound is expected to arrive in the second quarter of next year after the cyclical inventory adjustment, Chang said.

Eric Chen (陳慧明), a semiconductor analyst with Daiwa Capital Markets based in Hong Kong, said he expected TSMC’s revenue to decline 13 percent quarter-on-quarter in the final quarter of this year.

“We doubt TSMC can deliver more than 10 percent compound annual growth rate in pre-tax profits from 2010 to 2015 due to its [new] guidance, given its rising depreciation [resulting from high capital spending],” Chen said in a note yesterday.

TSMC expected gross margin to drop to between 46 percent and 48 percent this quarter, from 48.6 percent last quarter, despite projecting growth for this quarter of between 6 percent and 8 percent.

Revenue would expand to between NT$136 billion and NT$138 billion, compared with an all-time high of NT$128.06 billion last quarter. About half of the revenue came from chips used in smartphones and other communication devices.

TSMC maintained its record capital spending of between US$8 billion and US$8.5 billion unchanged for this year.

Net income expanded at a 24.9 percent quarterly pace to NT$41.81 billion (US$1.39 billion), compared with NT$33.47 billion in the first quarter. That was an increase of 16.3 percent annually.

TSMC expected earnings per share this quarter to be higher than last quarter because of there being no impairment charge.

Last quarter, an impairment write-down from Chinese chipmaker Semiconductor Manufacturing International Corp (中芯), of which TSMC owns 5.6 percent, eroded NT$0.09 in earnings per share from TSMC’s second quarter net profits, TSMC said.

The company said shipments of its 28-nanometer chip would double this quarter from last quarter, paving the way for the company to reach its goal of boosting revenue share from those chips to 20 percent by year’s end, from 7 percent in the last quarter.

Commenting on European semiconductor equipment maker ASML Holding NV’s proposal of a joint, multicompany investment in an advanced extreme ultra-violet (EUV) machine, Chang said he “felt no pressure.”

He said the company would not be pressured into participating in the program, even if Samsung Electronics Co decided to invest in co-developing the EUV machine.

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