Sat, Oct 30, 2004 page10

• Local chipmakers will prosper: TSMC head

  CLARIFICATION Taiwanese semiconductor firms can expect growth in excess of 10 percent over the next decade, outstripping their foreign rivals, Morris Chang said

  • By Lisa Wang / STAFF REPORTER
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  Taiwan's semiconductor industry is expected to average double-digit growth each year in the coming decade, eclipsing foreign rivals, a semiconductor heavyweight said yesterday.

  Morris Chang (張忠謀), chairman of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's top made-to-order chipmaker, made the prediction yesterday in a bid to shed light on his earlier comments on the highly cyclical microchip industry.

  On Tuesday, Chang said that the global semiconductor industry was expected to remain almost flat next year in terms of sales, as the industry is drifting into a new downswing.

  The industry will still grow in the long run, although sales in the glo-bal semiconductor industry were expected to increase at an average of 8 percent per year over the next decade, he said at the time.

  "But this [outlook] can't be applied to Taiwan's semiconductor industry, including the foundry business," Chang said at a question-and-answer session after a speech arranged by the Chinese-language business bimonthly CommonWealth.

  Taiwanese chipmakers can expect growth in excess of 10 percent during the next 10 years, he said, adding that TSMC aims to increase sales by 15 percent year-on-year during that period.

  "This is already a respectable figure," Chang said.

  Proof can be found in the company's track record, he said. TSMC's sales grew at an annual rate of 50 percent in the first 10 years after its establishment in 1987, compared with an average 17 percent growth of the global semiconductor industry from 1960 to 2000, Chang said.

  Local chipmakers are expected to manufacture products worth NT$1.14 trillion (US34 billion) this year, up 40 percent from last year, according to the latest forecast of the government-backed Industrial Technology Research Institute (ITIS, 工研院).

  "But overcapacity and high oil prices, which will hurt the global economy, are threatening to take the growth momentum away in 2005," ITIS analyst James Huang (黃俊勛) said yesterday.

  Sales growth next year could be reduced by more than half to 15 percent, as chip demand would dwindle if consumers turn cautious about buying electronic devices amid slowing economic growth, Huang said. In 2005, sales are expected to rise to NT$1.31 trillion.

  Sales in the global semiconductor industry are expected to jump about 27 percent to US$225 billion this year from last year, although this could be followed by single-digit gains annually until 2008, according to market researcher Gartner Inc's latest projections.

  Chang yesterday also commented on the policy of issuing stock bonuses to employees, an effective tool most local high-tech firms use to encourage a low turnover of engineers. This policy has recently come under fire, as shareholders said it is hurting their return on equity.

  Chang said that the expenses incurred by stock bonuses do place a burden on earnings and could distort a company's bottom line.

  In some cases, companies may find that their outlay for stock bonuses for their employees could be even higher than the company's profits after the stocks are translated into cash, he said.

  "Stock bonuses for employees should be categorized as spending, like the payrolls," he said.

  Chang said that TSMC was still seeking a better solution to keep talented employees and safeguard the shareholders' interests.
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