Taiwan chip makers feeling upbeat
By Faith Hung
EBN
(04/25/02 11:23 a.m. EST)
HSINCHU, Taiwan -- Encouraging reports from Taiwan Semiconductor Manufacturing Co. Ltd. and other Taiwan chipmakers suggest that the heart of the chip industry is regaining a healthy rhythm.
The report today from TSMC, the world's leading pure-play foundry, which said that net income rose 46% sequentially to $188.2 million in the three months to March, followed other reports of improvement earlier this week from companies like Advanced Semiconductor Engineering Inc.
ASE, the second-largest house that packages and tests chips after Amkor Technologies, had a net loss of $6.6 million, narrowed from the fourth quarter of 2001. DRAM maker Winbond Electronics Corp. reported net earnings of $4.2 million in the first quarter, ending the losses of the prior four quarters.
After the industry suffered through its worst downturn last year, executives believe they are now crawling back up from the bottom, citing more and more signs that point to an upward trend for sales and profits.
Harvey Chang, an executive vice president for Hsinchu-based TSMC, noted that TSMC sales and net income still gained over the previous three months ”Despite the fact that the first quarter is typically the low point of the year for semiconductor sales." Chang added that in the second quarter he expected orders from customers as well as revenues and profits to top those in the first.
TSMC's operating margins jumped to 22.9% in the first quarter, from 17.7% in the prior quarter, helped by stronger demand for high-end capacity that uses process technologies of 0.18 micron and below.
With the demand continuing to heat up, some analysts forecast an increase in average selling prices for TSMC and rival United Microelectronics Corp. “We expect a 5% to 10% ASP growth in 3Q and 4Q for foundries, compared with the current level,” said Rick Hsu, a senior analyst of Nomura Securities Co., Taipei.
The strength of growth in the second quarter does not signify a revival of the PC heyday of the last decade, but rather demonstrates the increasing demand for communications products such as wireless handsets, and consumer products like game consoles and DVD players.
ASE president Leonard Liu told investors at a conference in Taipei that while the strength of the PC market remains unclear due to the seasonal factor, ”We expect communications IC to start recovery, and consumer IC to post strong growth. The visibility for the overall packaging and testing industries is better than that of last year. ASE should return to profits in 2Q and sales should grow 5% to 10% from the first quarter.”
Key customers of ASE, Kaohsiung, Taiwan, include Motorola Inc., Intel Corp., Philips Electronics NV and Sony Corp.
DRAM manufacturers such as Hsinchu-based Winbond are optimistic about the outlook of the industry. “What we're seeing is an upward trend for the market this year,” said Hander Chang, an assistant vice president of Winbond. Chang is also optimistic about the benefits of such consolidations as the pending deal between Micron Technologies and Hynix Semiconductor. “If everything goes smooth for Micron Technologies to merge with Hynix Semiconductor, DRAM prices wouldn't be as volatile as before, which is a good thing for the whole industry.”
Industry leaders in Taiwan have enough confidence that demand is on the rise to put their capital spending money where their mouths are. TSMC has said that it's planning to invest $2.65 billion in capital spending this year, almost $1 billion more than its original target. Winbond, which has agreed to license the advanced 0.11 micron technology from Infineon Technologies AG and supply some of its output to the German chipmaker, plans to spend $200 million in capex this year.
Not wanting to be left behind as the growth in demand accelerates, Infineon has turned to Winbond to get exclusive access to 20,000 wafers per month made on the 0.11 micron technology starting 2003. Infineon is also expected to conclude talks in June with Taiwan's Nanya Technologies about a possible partnership to secure extra production lines.
Despite industry optimism, analysts caution that growth this year may be modest. With spot prices of standard 128 MB DRAM likely to drop from a peak of $4.35 in early March to $3.5-$3.6 in the June quarter, DRAM players will probably see flat growth in their earnings, some analysts said. The second quarter is typically a slow season for PC-related companies. |
