Reuters
UPDATE - TSMC surprises with strong Q2 forecasts
Tuesday April 29, 6:21 am ET
By Michael Kramer
(adds forecasts for second quarter, analyst comment)
TAIPEI, April 29 (Reuters) - TSMC, the world's largest contract chipmaker, said its first-quarter net profit fell 34 percent from a year ago, but forecast strong performance in the second quarter, effectively calling an end to a slump that has dogged the firm since 2001.
ADVERTISEMENT
"I am quite optimistic. I say this because the strength of the orders are so diverse. All segments -- computer, consumer and communications -- are quite strong," TSMC Chairman Morris Chang told an analysts' conference.
Analysts had already expected TSMC to show an improvement in the second quarter because customers like Nvidia Corp (NasdaqNM:NVDA - News) were accumulating stockpiles of new products. However, they were unsure of consumer demand for these products later in the year.
"In the second quarter, our customers are building inventory," Chang said. "There is a risk there, but the reason they are building inventory is because they think they can sell it."
TSMC said net profit for the January-March quarter reached T$4.36 billion (US$125 million), declining a third from the T$6.59 billion in the same period last year, but surging 71 percent from the previous three months.
It also said it expected shipments in the second quarter to surge more than 20 percent from the first quarter, while average prices would gain about four percent.
The projection means revenues will grow by more than the 15-20 percent quarter-on-quarter expected by most analysts.
TSMC announced results after the close of trade in Taiwan on Tuesday. Its shares rose 2.5 percent to close at T$45.10, halting a 8.9 percent slump over the previous three days.
The benchmark TAIEX (Taiwan:^TWII - News) index gained 1.47 percent on Tuesday, reversing the 11.1 percent fall over the past six days.
BEATING EXPECTATIONS
The first quarter's net profit brought TSMC's earning's per share to T$0.23, beating market expectations of T$0.15 a share, according to a Reuters survey of 10 local and foreign brokerages. Analysts said the difference was largely because tax credits were larger than anticipated.
For analysts, the real surprise came from its forecasts for second quarter.
"I think this was much more than the market expected," said ABN AMRO analyst Leo Li, who pointed to technical breakthroughs made by TSMC over the quarter.
"I think this shows that TSMC is comfortable competing with IBM," Li said, referring to news in March that prime customer Nvidia had broken precedent and placed orders with International Business Machines Corp (IBM) (NYSE:IBM - News).
TSMC also said it expected capacity utilisation to grow to 80 percent from 67 percent in the first quarter, and held its 2003 capital spending budget steady at US$1-1.5 billion.
Aside from a false dawn in the first half of last year, TSMC had been caught in a prolonged slump. The downturn started when telecom firms ran out of cash to pay for expansion in 2001, choking off demand for chips used in network gear.
TSMC shares slipped only 0.7 percent in the first quarter, compared with the 8.5 percent fall for rival United Microelectronics Corp (Taiwan:2303.TW - News; NYSE:UMC - News) and 11.27 percent fall in Charted Semiconductor (SES:CSMF.SI - News; NasdaqNM:CHRT - News), the sector's No. 3.
The Netherlands' Philips Electronics NV (Amsterdam:PHG.AS - News) owns about 26 percent of TSMC, the largest single ownership stake. |
