Chipmakers fail to bloom in June

Know anyone who wants to buy a computer, mobile phone or PDA? Taiwan's top chipmakers hope people start buying new gear soon as their global sales figures continue to drop.

The world's top contract chipmaker, Taiwan Semiconductor Manufacturing Co (台積電), and the No. 2, rival United Microelectronics Corp (聯電), both have fallen short of their sales targets for June.

The news signals further weakness in Taiwan's semiconductor industry.

"According to my estimations, both companies missed," said Dan Heyler, regional semiconductor analyst for Merrill Lynch in Taipei. "I was expecting a 2 percent [sales] gain at TSMC, which came in at a 0.4 percent decline. And, for UMC, I was expecting a 10 percent decline and they fell more than that to 14.4 percent."

UMC announced June sales yesterday of NT$4.2 billion (US$123 million), a 14.4 percent drop from May.

Likewise, investors found TSMC's June sales report of NT$8.5 billion (US$246 million) also depressing.

"There is really no visibility [for where the industry is headed] ? We don't rule out the possibility that quarter three might be even worse than quarter two," said Liu Chi-tung (劉啟東), director of investor relations at UMC.

With the lifeline for Taiwan's electronic sector tied to sagging global sales, shares of the two bellwether companies dragged down the entire TAIEX yesterday, analysts said.

TSMC and UMC combined make up 19.1 percent of the entire TAIEX -- almost one-fifth of the value of the market. The shares of both companies surpassed lows hit last December when the bourse hit a 52-week bottom of 4,555.91.

UMC ended the day yesterday at NT$41.2, its lowest level since 1999 (adjusted for dividends), and TSMC dropped to NT$61 per share, lower than December.

A number of analysts pointed out that with these two stocks breaking new lows, the entire market may well be headed in the same direction.

One analyst added that some companies have been selling shares of both firms just to keep up with loan payments and operating costs.

Exacerbating selling pressure on stocks is the flagging Taiwan dollar. The currency dropped past NT$34.5 to the US dollar yesterday, a psychologically important level. A large portion of the traded shares of both UMC and TSMC are held by foreign investors, who lost both share value and currency value yesterday.

Just about the only shred of "good" news, analysts said, was that despite the fact most chip makers in Taiwan continue to post month-on-month declines in revenue, "TSMC has [seen] greater stability compared to other parts of the chip industry," according to Calvin Chang, semiconductor analyst at JP Morgan Chase in Taipei.

TSMC's chairman, Morris Chang (張忠謀), has insisted all year that semiconductor sales would get progressively better each quarter, that the third quarter would be better than the second and the fourth better than the third.

With visibility so low and sales of mobile phones, computers and other electronic gadgets so lackluster worldwide, many analysts are not sure if the worst is yet over.

"Given the low level of demand right now, I personally don't think it's the bottom," said Merrill Lynch's Heyler.

"We're looking for some kind of improvement next year, but we don't expect it to happen this year," he added.