Taiwan Semiconductor to Trim Spending to Lift Returns (Update2)
By Alan Patterson
quote.bloomberg.com
Taipei, March 19 (Bloomberg) -- Taiwan Semiconductor Manufacturing Co., the world's largest supplier of made-to-order chips, said it will limit spending on expansion to lift profitability.
The company is aiming for a return on equity, or net income divided by shareholders' funds, of 20 percent, company Chairman Morris Chang said at a technology conference in Taipei. It missed that goal in the past two years, he said. Taiwan Semiconductor's return on equity was 7.5 percent last year and 5.4 percent in 2001, down from 31.4 percent the previous year, the company said.
``We have to return to the basics,'' Chang said. ``We're not going to spend any money unless we're very confident it's going to be utilized 100 percent from the beginning.''
Chang's comments come a day after Applied Materials Inc., the world's biggest supplier of chip-making equipment, said it will cut 2,000 jobs as companies such as Intel Corp. and Taiwan Semiconductor trim spending to cope with dwindling profits.
The cost of building a new chip factory has more than doubled over the past decade to about $3 billion.
``To keep production costs under control we've got to keep capacity under control,'' Chang told the conference, sponsored by Merrill Lynch & Co.
Chipmakers around the world are cutting spending as concerns about the global economy and an approaching U.S.-led attack on Iraq cause business and consumers to delay purchases of personal computers and other gear that uses semiconductors. Taiwan Semiconductor has cut its planned spending this year to $1 billion to $1.5 billion from $1.65 billion last year.
Based on current spending, the company's capital expenditure for the full year is ``now on the lower end of that range,'' company Chief Financial Officer Harvey Chang said in a separate presentation at the event. Any increase will depend on demand in the second half, when business should start to improve, he said.
Earlier this month Taiwan Semiconductor raised its first- quarter forecast for factory use to be a few percentage points higher than the 60 percent that it predicted at the end of January. |
