Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, yesterday said it would trim nearly 18 percent off capital spending this year after posting an annual decline of 22.5 percent in net income last quarter, as the sluggish global economy curtailed end demand for PCs and consumer electronics.
This year, TSMC plans to spend US$6 billion on new equipment and facilities, mainly on the most advanced 28 nanometer (nm) and 20nm technologies, less than last year’s record-high of US$7.29 billion, TSMC chairman and CEO Morris Chang (張忠謀) told an investors’ conference.
Deteriorating economic conditions, particularly in Europe, also prompted Chang to cut his forecast for world semiconductor revenue growth for this year to a 2 percent year-on-year increase, compared with the up to 5 percent annual expansion he estimated three months ago.
“We will perform better than the overall world semiconductor industry and foundry [contract chip manufacturing] industry this year,” Chang said.
In the semiconductor industry, mobile products would enjoy predictably strong growth and TSMC, which counts Apple Inc as a large indirect client, is well positioned in the mobile market with the right technology and capacity, he said.
Last quarter, the company’s net income fell to NT$31.58 billion (US$1.05 billion), compared with NT$40.72 billion in the same period of 2010, according to the company’s financial statement. On a quarterly basis, last quarter’s net profits -increased 3.9 percent from NT$30.40 billion in the third quarter.
The fourth-quarter results beat the expectations of some analysts. Samsung Securities analyst Warren Lau (劉華仁) and Credit Suisse analyst Randy Abrams projected TSMC would report NT$31.2 billion and NT$30.75 billion respectively, for the final quarter of last year.
The first quarter of this year, in terms of revenue, “is flatter than last year’s first quarter, but stronger than the seasonal average. The seasonal pattern in the last few years has been 4 percent to 6 percent lower than the fourth quarter” on the back of customers’ restocking in the seasonally slow season, Chang said.
“Another encouraging sign is that our booking forecasts indicate that our second-quarter revenue will be stronger than the first,” he added.
Revenue is expected to fall to between NT$103 billion and NT$105 billion this quarter, TSMC financial executive Lora Ho (何麗梅) said. That means a quarterly decline of 1.63 percent this quarter in the worst case scenario, compared with NT$104.71 billion last quarter, of which handset chips made up about 53 percent. At best, revenue is expected to grow 0.2 percent quarterly.
“The lead in ramping up 28nm technology is becoming a good driver for TSMC’s growth in the second half of the year, as more and more customers will migrate to this advanced technology to cope with growing demand for smartphones and tablets,” said Michael Chou (周立中), a semiconductor industry analyst with Deutsche Securities AG, Taipei.
“This quarter should be the trough for TSMC by revenue,” Chou said.
TSMC expects 28nm technology chips to account for 10 percent of the company’s total revenues in the third and fourth quarters. The chipmaker expects to complete 132 tape-outs of 28nm chips for customers this year after finishing 36 by the end of last year, Chang said.