Tito, this should give the AMAT construction workers some motivation. Jeff
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TSMC 1st-Qtr Earnings Jump 62% on Quarter as Gross Margins Soar
Taipei, April 20 (Bloomberg) -- Taiwan Semiconductor
Manufacturing Co., the world's leading maker of custom-design
chips, said first-quarter earnings surged 62.3 percent from the
previous quarter.
TSMC said net earnings rose to NT$4.09 billion ($123.9
million), or NT$0.68 per share, from NT$2.52 billion in the three
months to December, within estimates of between NT$0.55 and
NT$0.80 per share made by four fund managers. Earnings in the
first quarter of 1998 were NT$6.95 billion or NT$1.15 per share.
''Orders have flowed in at an amazing pace in the last two
months,'' chief financial officer Harvey Chang told institutional
investors. ''Many of our customers are concerned we won't have
enough capacity to make the products they need.''
TSMC's growth is more evidence that semiconductor companies
worldwide are rebounding after a supply glut and Asia's financial
turmoil gave the industry its worst year ever in 1998. Fujitsu
Ltd., Japan's largest computer maker and one of TSMC's clients,
said in April it expected its chip sales to grow 10 percent this
fiscal year.
TSMC said 88 percent of its production lines were utilized
in the quarter to March, up from 67 percent in the previous three
months, as demand rose from Canada-based ATI Technology Inc. and
from clients in the U.S. and Japan. Output increased to 319,000
wafers from 286,000 wafers during the same period, while gross
margins jumped to 49.6 percent from 33.8 percent.
''The margins blow the doors off my estimates,'' said Boris
Petersik, an analyst with Donaldson & Lufkin in Hong Kong, who
rates TSMC as a ''top pick.''
TSMC produces chips to customer orders, known as 'foundry.'
Chips are used in everything from personal computers and mobile
phones to cars.
Beneficiaries
The surge in TSMC's profits suggests Applied Materials Inc.
and chip-equipment manufacturers in the U.S., the Netherlands and
Japan will see their sales rise.
''It's good news for equipment suppliers Applied Materials
and ASM Lithography, as well as the Japanese,'' said Petersik.
Last week, the Semiconductor Equipment Association of Japan
said orders for Japanese chipmaking equipment totaled $552
million in February, the fourth month-on-month rise. That
indicates demand for equipment is rebounding, after a trough year-
on-year decline of 73 percent in October.
TSMC is optimistic that earnings will continue to rise in
the second quarter.
''Our utilization rate is very likely to surge to 90
percent, or even 95 percent,'' Chang said. ''We expect the gross
margins to stay at the 40 percent level on rising demand and
stable prices.''
Investors seem to agree. TSMC stocks soared 63 percent since
early January on expectations that global chip demand is
accelerating.
''What we see is that the chip industry is gaining momentum.
TSMC will absolutely benefit from that,'' said William Cheng, who
manages NT$2.5 billion for Fuh-Hwa Investment Trust Co. TSMC is
Cheng's core holding, accounting for more than 8 percent of his
portfolio.
As of yesterday, TSMC was the most popular Taiwanese stock
among overseas investors. That translated into 1.03 billion
shares held by foreigners, or about a sixth of TSMC's total
outstanding shares. TSMC rose 0.4 percent today to NT$116.50,
near an all-time closing high.
Blight
To be sure, slowing PC demand growth worldwide may mean
trouble for TSMC.
''We're bullish about the second quarter,'' Chang said.
''However, the earnings performance of U.S. computer-related
companies were not that great,'' which may slow down TSMC's
growth.
Compaq Computer Corp.'s Chief Executive Eckhard Pfeiffer and
Chief Financial Officer Earl Mason resigned this week after the
company warned first-quarter earnings will be only half as much
as forecast because of slowing PC demand. Intel Corp. also blamed
lower-than-expected first-quarter sales on a dip in demand for
PCs.
(All figures in millions of New Taiwan dollars, rounded, except
earnings per share)
1Q99 1Q98 Y-o-Y% 4Q98 Q-o-Q%
change change
Net earnings 4,090 6,947 -41.1% 2,524 62.0%
EPS 0.68 1.15 -41.1% 0.42 62.0%
Operating profit 4,873 6,709 -27.4% 2,893 68.5%
Sales 12,501 15,736 -20.6% 11,633 7.5%
Apr/20/1999 6:31
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