TSMC's Q2 income hits record high

OPTIMISM: The chipmaker said price hikes and increased shipments contributed to its performance. Chairman Morris Chang was positive about the rest of this year


Fri, Jul 30, 2004 - Page 10

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top made-to-order chipmaker, yesterday gave an upbeat outlook for the semiconductor industry, saying overblown inventory would not pose a threat to rising demand mostly from computer segment.

TSMC said second-quarter net income surged to a record high to around NT$23.41 billion, or NT$1 per share, on revenue of NT$64.87 billion, on strong chip demand.

That result is double that of a year ago, during which TSMC reported a net income of NT$11.73 billion, or NT$0.5 a share.

TSMC, a bellwether of the semiconductor industry, has been in the limelight since gloomy sentiment started to spread amid a spate of recent downgrades on global semiconductor stocks by foreign investors led by Goldman Sachs last month on mounting stockpiles.

"There is more undesired inventory in the supply chain, but not in our customers’ inventories,” TSMC Chairman Morris Chang (張忠謀) told an investor’s conference yesterday.

Chang said that demand in the end market is pretty healthy.

"We think the inventory problem will be worked out within the next several months. And the impact on TSMC's business will be minimal," he said.

Looking ahead, TSMC, which supplies chips to Qualcomm Inc, a leader in the chips for handsets industry, will see higher revenue for the fourth quarter, compared with the previous quarter, he said.

During the final quarter, average prices are expected to remain flat, or to rise further from the current level of around US$1,700 per wafer, Chang said.

His confident speech aimed to pin down jitters about higher-than-expected inventories would result in an early semiconductor slump to set in in 2005.

Chang said the next semiconductor trough might arrive in 2006, but the impact will be modest, compared to the last downturn in 2001, which caused a 30-percent drop in revenue for the industry.

Next year, the global semiconductor industry will still have a 8-percent growth in revenue at least.

To reinforce his optimism, TSMC yesterday announced it would increase its capital expenditure for this year to US$2.4 billion from the US$2 billion it estimated in January.

Spending on new equipment is likely to continue to increase, to exceed US$2.4 billion next year, Chang said.

Deutsche Securities recently upgraded its position on TSMC to "buy," bucking the trend of downgrading semiconductor stocks.

Deutsche Securities said its position was based on the fact that the US, which consumes most of the world's electronics, should have strong growth of 4.2 percent next year.

"We won't change our position in the short term," said Johnny Chen (陳政隆), vice president of equity research of Deutsche Securities Asia Ltd in Taipei.

Giving a positive outlook for the third quarter, TSMC vice president Lora Ho (何麗梅) said wafer shipments will increase as much as 6 percent.

Demand from the computer sector will be the strongest, Ho said.

The utilization rate will be around 100 percent during the current quarter. Average selling prices would remain at about the same level as in the last quarter, she said. Gross margins will improve to 45 percent from 43.4 percent in the second quarter, she said.