The world's largest producer of made-to-order chips, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), reported yesterday that revenue in October grew 142 percent year-on-year and beat analysts' expectations as demand for wafer foundry services continued to outstrip supply.
The chip subcontractor posted revenue last month of NT$17.462 billion for a sixth successive monthly record high, and up 6.54 percent over revenue in September. Revenue for the first ten months of the year rose 129 percent year-on-year to NT$129.86 billion, to reach 78.7 percent of the company's year 2000 financial target of NT$164.87 billion.
"The number was higher than my expectation," said Alfred Ying, an analyst at BNP Paribas Peregrine Securities in Hong Kong, who had expected the company to post revenue for October of NT$17 billion. "A better foundry average selling price and higher capacity explain the company's higher growth," said Ying, who is predicting an earnings per share for the company of NT$5.5 this year and NT$8.8 next year.
TSMC reported last month that its average selling price for all wafers had continued to rise throughout the year and is expected to reach a four-year high of about US$1,500 in the fourth quarter of this year.
K. C. Chen, spokeswoman for TSMC, said in a statement that the company was continuing to expand capacity to meet demand for its wafer foundry services and that production capacity remain fully utilized.
Analysts had been concerned that demand may be falling as a result of the slowdown in demand for personal computers and communications products. September's revenue growth of less than 2 percent compared with August seemed to bear out such concerns.
"The October figures show that the situation is very good," said Thomas Chen, senior analyst at Polaris Securities Co. "I had originally expected about NT$16.5 billion would be pretty good," said Chen.
Still, after rising over 20 percent so far this month, shares in TSMC fell 1.71 percent yesterday to NT$115 amid profit-taking and rumors that the National Stabilization Fund was withdrawing from the market.
However, with demand for foundry services expected to remain strong next year, analysts are confident that the price trend of TSMC and competitor United Microelectronics Corp's (UMC,
"The growth rate of foundries will still be very high next year with the strong demand for consumer products and communications products and from integrated device manufacturers," said Ken Cheng, an analyst at China Securities Co who rates both TSMC and UMC strong buys.
Despite concerns about lower utilization rates and less profitable product mixes, the strong October revenue figures reported by TSMC and UMC show that "the foundry situation is still good," said Cheng. "It ends some worries that the foundry situation will deteriorate." UMC reported Wednesday that revenue last month grew 272 percent year-on-year and 3.8 percent compared with September to NT$10.71 billion.
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