Taiwan chip foundry revenues show worst may be over
By Michael Kramer
TAIPEI (Reuters) - The world's top two contract microchip makers, or foundries, met their promises to investors on third quarter revenues on Monday, showing signs that the worst of a severe downturn in the chip industry may be over.
While analysts attributed a streak of monthly gains to an annual year-end surge in electronics sales, they said foundry revenues were unlikely to fall back to their mid-2001 trough when the slack season comes around again in December and January.
Taiwan Semiconductor Manufacturing Co (TSMC) <2330> , the world's largest foundry, said it made sales of T$9.308 billion ($269 million) in September, marking its third consecutive month-on-month increase.
Though September sales were down 43.2 percent from the same month last year, they made for July-September revenues of T$26.94 billion, up 2.4 percent from the second quarter.
That helped TSMC deliver on company chairman Morris Chang's oft-repeated pledge that the third quarter would be better than the second quarter, and lent strength to his vow that the fourth quarter would show further improvement.
Taiwan-based United Microelectronics Corp (UMC) <2303> , the world's second largest foundry, put together a streak of its own in September, showing its second straight monthly improvement with revenues of T$4.18 billion.
UMC's third quarter revenues of T$12 billion were also on track with the company's guidance to analysts of a 15-20 percent decline from April-June revenues of T$15 billion, and the company expects to post a quarter-on-quarter improvement in the final three months of the year.
NO SURPRISE TO MARKETS
SG Securities analyst Connor Liu said he was "neutral to positive" on the small monthly increases for the two foundries, which build made-to-order chips for design houses like NVidia , Xylinx and firms such as Motorola .
"The trend is still growth, and there is no conflict with what these companies have said earlier. The numbers are more or less what the market expects," Liu said.
However, he cautioned that it could be too early to hail the figures as a sign that the semiconductor cycle had bottomed, saying they were powered by seasonal demand.
"While first quarter could be flat or worse than fourth quarter, it won't be very severe. It won't be the same kind of heavy decline that we saw in the second quarter," he said.
As the highly cyclical semiconductor sector faces one of its worst downturns in industry history, both Taiwan foundries, which are perched near the top of the electronics production chain, cut their 2001 financial forecasts last week after enjoying record profits in 2000.
TSMC slashed its 2001 net profit forecast to T$11 billion from T$25.7 billion, and reduced its sales forecast to T$121.9 billion from T$149 billion, while UMC now expects a T$3.2 billion loss against an earlier T$13.33 billion profit estimate.
Both firms announced their sales figures after close of Taiwan trade on Monday. TSMC shares fell T$0.80, or 1.7 percent, to T$46, while UMC shares gained 0.80 percent to end at T$25.20. The benchmark TAIEX share index lost 1.82 percent.
September sales figures were not directly affected by attacks on U.S. landmarks that shut airports in America for about a week, or a typhoon that grounded flights from Taiwan for days, as contracts with foundries are for freight-on-board, and customers handle shipment to their own plants.
Semiconductors are all shipped by air due to their small size and the industry's rapid product cycles.
+++++++++++++++=
09:00 ET Morgan Ups Foundries : Morgan Stanley upgrades Taiwanese chip foundries Taiwan Semi (TSM 9.29) and United Microelectronics (UMC 4.74) to OUTPERFORM from Neutral; says declines in stocks since Sep 11 discount an overly pessimistic scenario. |
