TSMC expects sales to rise 30% this year

The Taiwan Semiconductor Manufacturing Co (台積電), the largest maker of chips for other companies, said it expects sales to rise by as much as 30 percent this year as more customers farm out production to cut costs.

"We expect our revenue to grow this year in the 20 percent to 30 percent range at least," Chairman Morris Chang (張忠謀) said in an interview. "There will be more outsourcing." He declined to forecast profit.

Chang's estimate, quadruple the rate forecast for the industry and above expectations of some investors, underscores TSMC's success at providing a wider variety of production technology than United Microelectronics Corp (UMC, 聯電). That helped it stay profitable while UMC and Singapore's Chartered Semiconductor Manufacturing Ltd (特許), its largest rivals, turned to losses.

TSMC's confidence may also signal a recovery in the chip industry amid a rebound in demand for everything from personal computers and mobile phones to electronic games. TSMC's orders from chipmakers such as Intel Corp rose in the fourth quarter, helping the company raise its use of production equipment to half from a record low of 40 percent in the third quarter.

TSMC plans to collaborate with other chipmakers to build plants offering the latest chipmaking technology, Chang said, without naming potential partners. The company wants to expand capacity by as much as a quarter annually and also plans to build a factory in China once Taiwan lifts its ban on chip-related investment in the mainland, he said.

TSMC said it expects to form ventures with other companies to make 12-inch silicon wafers, which will cut costs by more than doubling the number of chips produced from the 8-inch disks more commonly made today. UMC and Advanced Micro Devices Inc, the second-largest maker of computer processors, announced such a venture last week.

"We're in talks," Chang said. "It's not with just one or two companies."

Besides companies in the chip-foundry business like TSMC, only Intel Corp, the largest chipmaker, is "comfortably able" to afford the approximate US$3 billion investment in the new dinner-plate sized wafers, Chang said. Computer-memory chip makers Samsung Electronics Co and Micron Technology Inc as well as Texas Instruments Inc, which makes chips for mobile phones, should be able to muster funding for the new plants, he added.

TSMC and UMC are among the five companies in the world that started production of 12-inch silicon wafers, which are expected to reduce chipmaking costs by about a third. TSMC expects to achieve the cost savings by mid-2004. The company also expects to expand production capacity by about 20 percent to 25 percent annually for the next 10 years, Chang said.

The company's construction of five chip plants in southern Taiwan at a cost of US$20 billion during the period will only meet half of those requirements. One of the five plants, also called fabs, is complete while another is being built. The construction of the remaining three has yet to be started.

"Five fabs will be enough for half of our requirements," Chang said. "We will probably need more land. China will be part of it, I hope."

TSMC hopes that the Taiwanese government will end a ban on chip investments in the mainland before the end of this year.

"I certainly hope it'll be long before the end of 2002," Chang said. "We want to be there in two to three years. If the government gives the green light, it will be two years before we start production." TSMC plans to build its own factory in China, which will take several years. The company doesn't plan to form a partnership with any companies in China.