Taiwanese semiconductor companies are expected to enjoy a robust 16 percent annual growth in revenues this year on the back of healthy inventory levels, a local industry association said in its latest report.
Last year, local chipmakers posted a decline in revenues of around 6 percent from 2004 as clients' excess inventory and overcapacity stifled demand and drove down chip prices, Taiwan Semiconductor Industry Association (TSIA,
That also dragged down the growth of the nation's semiconductor companies, which posted flat revenue, compared with a 17 percent increase in revenue in the rest of Asia.
As inventories leveled off, Taiwanese chipmakers started to rebound in the second half of last year on improving utilization and profitability, said the association which is based in Hsinchu, home to Taiwanese semiconductor heavyweights such as Taiwan Semiconductor Manufacturing Co (TSMC,
As the momentum is expected to continue into this year, "Taiwan's semiconductor industry will experience promising growth in the future," TSIA said.
The association represents nearly 200 local semiconductor firms.
Overall, Taiwanese semiconductor companies would grow by around 16 percent in terms of revenue this year to NT$1.3 trillion (US$39.8 billion), compared to NT$1.12 trillion last year, with chip testing service providers leading the growth on rising demand, TSIA projected.
Taiwanese chipmakers, which contribute half of the total revenue of local semiconductor firms, would expand at a slower 14 percent rate to NT$671 billion, according to the association's forecast. Revenue stood at just NT$587.4 billion last year, a decrease of 5.9 percent from 2004.
Investment research firm Merrill Lynch also made positive comments on the Asian semiconductor industry's prospects for the near term.
"The second quarter will be better than the first for foundry companies [contract chipmakers]," Merrill Lynch analyst Daniel Heyler said at a press conference in Taipei last week.
He expected shipments from contract chipmakers to grow by 6 percent in the second quarter compared to the first quarter after taking a seasonal dip of 2 percent in the first three months of this year.
"Lingering concerns about an inventory correction simply have not been borne out," Heyler said.
During the second half, factory utilization for contract chipmakers would rise further, helped by growing demand in the traditional strong season for computer and consumer electronics sectors, he said.
He expected factory utilization at United Microelectronics Corp (UMC,
“UMC's recovery is dependent largely on its two key customers, Texas Instruments Inc and Xilinx Inc,” he said.
He gave TSMC and UMC “buy” ratings with 12-month target prices of NT$71 and NT$22, respectively. Shares of TSMC rose NT$0.2 to NT$59.8 on the Taiwan Stock Exchange on Friday, while UMC shares were unchanged at NT$18.95.
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