Taiwan Semiconductor warns of slump in early 2001
(UPDATE: recasts, adds fund manager comment)
By Michael Kramer
TAIPEI, Feb 6 (Reuters) - Taiwan Semiconductor Manufacturing Co (TSMC) (NYSE:TSM - news) met market expectations dead on with record 2000 earnings, but surprised investors on Tuesday with a worse than expected outlook for early 2001.
TSMC said net profits surged 165 percent in 2000 to T$65.1 billion thanks to strong demand for its made-to-order microchips, built for customers such as Motorola (NYSE:MOT - news) and Altera (NasdaqNM:ALTR - news).
``Last year was a very rare year, it was a good year for every microchip maker in the world,'' said TSMC chairman Morris Chang.
Microchips, pieces of silicon smaller than a pinhead etched with tiny circuits, are used in nearly every electronic device.
Chang warned, however, that he expected sales to slump in the first three months of 2001 but begin to recover by the final half of the year, giving TSMC double-digit revenue growth for 2001, and an even faster increase in 2002.
``Since November we have received a string of warnings from U.S. clients saying growth was not as strong as expected, but in the past few weeks the pace has slowed,'' Chang told an analysts' conference.
CAPACITY UTILISATION RINGS ALARM
He also said TSMC's closely-watched capacity utilisation rate, a measure of actual versus maximum rated output, was forecast to fall to 70 percent after hovering above 100 percent all of last year.
Investors said TSMC's current share price had priced in a fall to about 85 percent capacity utilisation.
``Such a low capacity utilisation is totally unexpected,'' said Li Fang-kuo, fund manager for First Global Investment Trust. ``TSMC shares are likely to fall limit-down tomorrow,'' he said, referring to Taiwan's seven percent daily trading limit.
Earnings were announced after the close of trade in Taipei.
TSMC, the market's most heavily weighted stock, slumped T$0.50, or O.51 percent, to T$98.00 on moderate volume of 33.8 million shares, while the TAIEX (^TWII - news) share index lost 1.41 percent.
TSMC'S record 2000 profits worked out to T$5.7 per share, in line with the average of 20 analysts' forecasts compiled by Barra's The Estimate Directory.
TSMC had already announced 2000 sales, which grew 127 percent to T$166 billion. The chipmaker's quarterly profits for the last three months of 2000 also set a record, rising 158.4 percent to T$21.473 billion.
Monthly sales broke records in October, November and December, outdoing many semiconductor rivals who had begun feeling the bite of a sales slowdown in personal computers, which account for the bulk of microchip consumption.
Chang said the weaker market would begin to catch up with TSMC sales in the first three months of 2001 which would be 25 percent lower than the T$53.8 billion posted in fourth quarter of 2000.
Shipments of silicon wafers were also expected to shrink 29 percent quarter-on-quarter in the first three months of 2001.
In line with falling utilisation rates, TSMC would cut capital expenditure to US$2.7 billion in 2001, down from an earlier budget of US$3.7 billion and last year's aggressive US$3.8 billion.
RECOVERY SEEN IN SECOND HALF
Chang said capacity utilisation would hold steady at 70 percent in the second quarter, and gradually improve for the rest of the year. ``By then, inventory will be worked out,'' he said.
Most analysts say the current slowdown in the semiconductor industry is due to an inventory pileup down the production chain with PC makers, who will begin placing fresh orders once the stockpiles are digested.
``I don't think this is a down cycle, it's just a pause,'' Chang said of the downturn in the highly cyclical semiconductor business. ``Visibility is not good at all, I admit it, but I have given you my forecast.''
He also expected average standard prices to rise by seven percent quarter on quarter in the first three months of 2001, as clients order a larger proportion of complex, high-tech chips for which TSMC can charge higher rates.
``It's unexpected, but it's not so bad since the outlook will improve from the third quarter,'' fund manager Alan Huang said of the 2001 forecasts.
``TSMC shares may fall one or two days, but I believe it would seek strong support at around T$90,'' said Huang, senior fund manager of China Securities Investment Trust.
Philips Electronics , Europe's largest consumer electronics firm, is a major TSMC shareholder.
(US$1 equals T$32) |
