Tech shares suffer after sour report

THE CHIPS ARE DOWN: The world's top maker of semiconductors said its revenue will plummet, and investors reacted by dumping stocks in the local technology sector

By Tsering Namgyal  /  STAFF REPORTER

Thu, Feb 08, 2001 - Page 17

Taiwan Semiconductor Manufact-uring Co (TSMC, 台積電) led the local bourse 2.66 percent lower yesterday after the company's chairman warned that revenues will decline. The announcement only increased concerns that the worst may be yet to come for the slowing technology sector.

The benchmark index closed down by 155.48 points to end at 5,693.58 on turnover of NT$93.62 billion as investors took profits in tech shares, which have rebounded over the past month.

Tuesday's comments by TSMC Chairman Morris Chang (張忠謀) that the firm's revenues in the first quarter will drop by 25 percent thanks to the slower global growth sent shivers through financial markets yesterday, triggering a sharp sell off in tech shares.

"TSMC is one factor," said Wu Hui-chen (吳惠珍), an analyst at China Investment Trust Corp (中華投信). "But then there is the Fourth Nuclear Power Plant (核四) issue."

TSMC fell by their daily limit after investors fell out of favor with the company, seen as one of the most popular companies in the Asia Pacific region.

TSMC said Tuesday its capacity utilization ratio in the first quarter will fall to 70 percent from 100 percent in the fourth quarter last year.

"This is a very, very bad news," said Ben Lee, semiconductor analyst at Gartner Dataquest Group, a technology market research group in Taipei. "Looks like there are clients canceling orders."

While some analysts were more cautious in their statements, actions spoke louder as they downgraded their earnings forecasts for Taiwan's top blue chip firm -- a move which may have sent the stock further down.

"We have revised the earnings down but have kept the recommendation unchanged," said Tiffany Chen (陳瑋倫), semiconductor analyst with China Securities Co (中信證券), a brokerage arm of Koos Group. Chen, who recommends the company as a "buy on weakness," cut her 2001 earnings estimate by 11 percent to NT$4.7 yesterday.

Eric Wang (王秀鈞), head of global semiconductor research at ABN-AMRO, cut his 2001 EPS forecast for TSMC by 22 percent to NT$4.35 and 13 percent to NT$7.03 in 2002. "There will be a recovery in the second half of the year but it will be mild as there is no evidence of a pick up," Wang said.

Shares of the world's biggest made-to-order chip company fell NT$6.50, or 6.6 percent, to NT$91.50.

Global chip sales, which grew 37 percent last year, are lagging expectations now, analysts say.

Analyst expect the stock to fall until inventories of computer, communications and consumer electronic chips have been reduced, which may take months. "I would expect the share price in the near term to lack a catalyst until global inventory levels begin to fall to a more normal level," said Dan Heyler, head of Asia Pacific semiconductor research at Merrill Lynch Taiwan..

Heyler cut his 2001 earnings per share forecast for TSMC by 14 percent to NT$4.48 after the company said its first quarter may miss expectations.

Andrew Lu (陸行之), chief semiconductor analyst at Salomon Smith Barney in Taipei, cut his 2002 earnings forecast for the company by 16 percent to NT$4.1, local media reported.

Meanwhile, TSMC's rival, United Microelectronics Corp (聯電), said that the company's capacity utilization rate may also fall to between 75 to 80 percent in the first quarter thanks to slower-than-expected global demand for ICs.