A recovery in the stock market hinges on a rebound in chip demand. TSMC's profit all but vanished in the second quarter as makers of computers and mobile phone chips, its main customers, said sales will fall this year. Global chip demand may shrink 21 percent to US$139.2 billion, according to researcher IC Insights Inc.
"If we're taking the scenario the US economy will return to recovery grounds towards the latter part of this year, then the Taiwan market will also benefit as a result," said Kenny Tjan, who helps manage US$1 billion at Rothschild Asset Management in Singapore.
TSMC itself is optimistic and expects operating profit to improve in the third quarter. Even so, chairman Morris Chang (
"I don't think they'll make a profit" in the third quarter, said fund manager King, who holds TSMC. "They possibly will incur more depreciation costs."
TSMC has already paid the price for being over optimistic after expanding capacity by 80 percent last year. Profit fell 98 percent to NT$312 million in the second quarter largely because operating expenses doubled to NT$4.7 billion
"Fundamentals are clearly not looking great," said Emil Wolter, who helps manage US$3 billion in global emerging market investments at Pictet Asset Management Ltd in London. He's steering clear of TSMC.
That's bad news for TSMC and may be bad news for Taiwan.
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