Please keep in mind that this is yet another article relating to the report by MS earlier this week; no new news from either UMC or TSCM is in the piece. As such, the headline is very deceiving IMO.
Taiwan chip makers to lower forecasts amid slowdown
By Mark LaPedus
Semiconductor Business News
(07/03/02 18:28 p.m. EST)
SAN JOSE -- Taiwan's chip makers are among the few bright spots in an otherwise dismal semiconductor market.
Or are they? A leading investment banking firm this week lowered its forecast for the island's two major silicon foundry providers--Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and United Microelectronics Corp. (UMC).
And Macronix International Co. Ltd., Taiwan's largest nonvolatile memory maker, lowered its forecast for the entire year. Other Taiwan chip makers are also feeling the pain after a mild recovery in the first part of 2002.
The biggest shocker is TSMC and UMC, both of which were showing steady and positive gains over the last several quarters. While the respective fabs from the two companies are still running at over 70% utilization, the “order flows from Nvidia and ATI to TSMC and MediaTek to UMC have been declining since the middle of 2Q02,” according to a report issued this week from Morgan Stanley Dean Witter & Co. in San Francisco.
The report was referring to some of the world's largest fabless design houses, including ATI Technologies Inc., Nvidia Corp., and MediaTek Inc. ATI and Nvidia make graphics ICs, while MediaTek makes DVD and CD-ROM chips.
The move prompted Morgan Stanley to lower “its sales expectations for PC [chip revenues] for both UMC and TSMC.” And the investment banking firm lowered its overall forecast for TSMC.
In the report, Morgan Stanley did not elaborate on the new forecast for TSMC or UMC, but the handwriting is on the wall. In fact, analysts started to lower their expectations for the foundries last month.
In May, Taiwan foundries enjoyed rising demand, as sales hit their highest monthly levels in more than a year. TSMC announced that sales in May totaled $447.1 million, climbing 13.7% from April and 77.8% from May 2001. UMC said that May sales jumped 33.9% sequentially to $195 million and 26.5% from a year earlier.
But starting early last month, there were concerns that their prospects in the third quarter would not be as strong as expected, especially after Advanced Micro Devices, Intel, and others have lowered its revenue expectations, according to analysts.
The consensus among analysts had been a sequential growth of 20% or more for the foundries' sales in the September quarter. But according to BNP Paribas Peregrine Securities in Hong Kong last month, the foundries are now only looking at a 10% to 15% gain (see June 7 story ).
More recently, the CEO of UMC said that there will be some uncertainties in the semiconductor industry in the second half of 2002. In a technology briefing, John Hsuan told EBN and other reporters in Taiwan that PC demand has declined, while orders from wireless communications companies are picking up.
“It's difficult to see now how solid demand will turn out in that quarter,” said William Dung, a research director for UBS Warburg, Taipei. “Our observation is that a real recovery wouldn't come till next year,” he said in a report in EBN (see June 27 story ).
Taiwan's foundries are not the only victims. At the same time, Macronix originally expected to report break-even earnings on sales of NT$25 billion. Now, the Hsinchu-based company projects its sales will hit NT$19 billion, with a loss of minus $9.6 billion.
The company's quarterly sales “had hit bottom in the first quarter of 2002,” but it now faces a decline in average selling prices (ASPs) for its product lines, according to Macronix in a statement issued by the chip maker.
EBN, a sister site to Semiconductor Business News, contributed to this report. |
