UPDATE 1-Taiwan semicon makers delay capex spending
By Baker Li
TAIPEI, Sept 27 (Reuters) - Major Taiwanese semiconductor makers are turning cautious about expanding as uncertainty about the impact on the struggling electronics industry of the U.S. war on terrorism has crushed hopes of any Christmas sales cheer.
The market had hoped that Intel Corp (Singapore: INTC.SI - news)'s new Pentium 4 microprocessor and Microsoft Corp (Singapore: MSFT.SI - news)'s Windows XP operating system would trigger fresh demand for computers in the fourth quarter, in time for crucial year-end holiday shopping.
Goldman Sachs underscored the bleak outlook by cutting its earnings estimates for Intel, and for major Taiwan microchip and computer makers, saying PC demand will not recover soon.
"As the impact of the September 11 event reverberates through the economy, hopes for even a muted 4Q 2001 pickup in PC spending may be optimistic," said a Goldman Sachs research note on Compal Electronics <2324.TW> and top notebook maker, Quanta Computer
<2382.TW>.
Taiwan Semiconductor Manufacturing Co (TSMC) <2330.TW>, the world's largest contract chipmaker, said on Wednesday it would not use all its US$2.2 billion capital expenditure budgeted for this year and spending next year would be less than 2001 as market conditions remained sluggish.
TSMC planned to cut its financial forecast for 2001 because it was compiled in April and was now outdated. Some securities houses did not wait to act and included 2002 in their forecasts.
Citing heightened uncertainties in the macroeconomic outlook, Goldman Sachs on Thursday slashed sharply its earnings per share
(EPS) forecasts for TSMC and United Microelectronics Corp (UMC)
<2303.TW> for 2001 and 2002, while cutting the utilisation rates for the two companies into next year.
Goldman said its 2001 EPS estimate for TSMC was cut to T$0.01 from T$0.16, while the new 2002 EPS fell to T$1.35 from T$3.68.
The U.S. investment house also cut its 2001 EPS forecast for UMC to T$0.13 from T$0.28 and the 2002 EPS estimate plunged to T$0.03 from T$2.23.
CONSERVATIVE STRATEGIES
Nanya Technologies <2408.TW>, one of Taiwan's largest memory chip makers, said two days after the devastating attacks in New York and Washington that it would delay a T$8 billion issue of global depositary receipts (GDRs) planned for November.
The postponement would force the company to delay completion of a cutting-edge manufacturing plant using 12-inch silicon wafers.
"They have reasons to be conservative because the expected fourth-quarter recovery is gone and will likely be delayed until the third quarter next year," said Calvin Chiang, fund manager for Barits Securities Investment Trust's Niche Fund.
Given such a scenario, other local chipmakers could face difficulties raising funds overseas for expansion this year as uncertainty darkens global equity markets.
"Many chip companies have plans to issue shares overseas but the problem is who will be willing to buy?" asked Connor Liu, a senior analyst who tracks the semiconductor industry for SG Securities.
"The chances are high for them to delay the issues until next year," he said.
Local chip makers that plan overseas listings through GDRs later this year include Powerchip Semiconductor <5346.TWO>, Mosel Vitelic <2342.TW> and ProMos Technologies <5387.TWO>, 33-percent owned by Infineon Technologies AG , Europe's No. 2 chipmaker.
Although global financial markets are in a tailspin, the companies said they had no plans to delay the issues.
"They can't expect money to come in from earnings, so they must issue new shares to raise money," said SG Securities' Liu.
"Despite the expected postponement, they have to do
(listings) again next year at the latest or they'll face severe cashflow problems,"
Nanya's cash balance fell to zero at the end of the second quarter as market conditions prompted the delay of a domestic share offer. After the issue price was cut from T$27 to T$24 then to T$20, the shares were finally sold at T$15 in early August, raising T$7.5 billion for the DRAM maker.
"Moving to China is a long-term strategy, but will be too late to be of use in the current crisis," said Jackie Hung, fund manager for Golden Dragon Fund of International Investment Trust.
"It's a problem of the industry cycle, although nobody knows when the next upturn will come."
The government has forecast the economy will shrink 0.37 percent for 2001 -- its first full-year contraction -- though the island's top economic planner said last week the U.S. attacks and recent typhoons could cut Taiwan's GDP by another 0.2 of a percentage point |
