Demand revival spurs TSMC sales, profits
by Mike Clendenin, EETimes
Semiconductor Business News
07/24/2003, 5:21 AM ET
TAIPEI -- Taiwan Semiconductor Manufacturing Company Ltd. sales and profits hit two and a half year highs in the second quarter and the company expects the "fine performance" to continue this quarter as the beginnings of a tech recovery take deeper root.
Sales for the second quarter reached NT$49,922 million ($1.43 billion), with profit of NT$11,730 million ($338 million). On a sequential basis, second quarter sales grew 26.9 percent and profit soared 169.2 percent. Year on year, sales were up 13 percent; profit was up 26 percent.
The foundry said wafer shipments should increase by several percent in the third quarter, and ASPs should "hold firm with potential to improve." The company said revenues from advanced processes (0.18-micron to 0.13-micron) will account for about two-thirds of third quarter revenues.
The foundry's overall utilization rate will exceed 90 percent, compared to 88 percent in Q2, with demand declining for PC products but increasing for consumer and communications products. Its 2003 capex expenditures should land around $1.25 billion, halfway between its earlier estimate of $1 billion to $1.5 billion.
Despite the good results, TSMC Chairman Morris Chang wasn't convinced that a tech recovery was underway. "I don't think you can call it a recovery -- at least not yet," he said at TSMC's quarterly conference held Thursday in Taipei. "Specific companies have done well and we are one of them."
Even though utilization will increase, Chang said the company would have no problem with matching capacity increases to demand. In general, he said the ramp-up is slower for 130nm and more predictable because it is coming from fewer, yet bigger, customers, which contrasts with the transition to 180nm.
The 180nm ramp, he said, happened amid the tech boom of 1999-2000 and there were dozens of big customers clamoring for it, making it hard to gauge real demand. But at 130nm and 90nm, he said the foundry has close relationships with the few big customers that are interested in the technology. "So I don't think there will be a serious mismatch between demand and capacity," he said.
Significantly, he also said the foundry didn't anticipate raising prices for any particular technology node, noting that their predictions of improved ASPs would come from a better technology mix.
The TSMC chief said Moore's Law will have to slow down so that companies like his could get better return on their investment in sub-100nm technologies. Chang predicted that the 90nm ramp "will be a lot slower and customers will be fewer," adding that a serious volume build-up won't happen until early 2006 " a year later than the industry timetable.
Just like process times increased by about two weeks during the 180nm to 130nm transition, he said the same will happen from 130nm to 90nm. "Steps will increase as the process gets more complicated, but we are trying to reduce time per step," he said. "The economics will be more difficult and more unfavorable so we will have to work harder to overcome it. That's why Moore's Law will slow down."
Chang also downplayed lingering questions about IBM, whose foundry services are perceived as an upcoming rival. Chang said, "We respect them but we do not fear them."
He said IBM is still behind TSMC in three key areas " general application technology, manufacturing and customer service. "Many people believe IBM is strong, but we are strong, too," he said.
While IBM may be ahead in niche areas, such as embedded DRAM, silicon on insulator and silicon germanium, he said TSMC still had a respectable reputation in generic 130nm and 90nm technology. In the use of low-k dielectrics, "we may be ahead of IBM," he said, pinpointing an area of trouble for the US giant, which stumbled while trying to work with the first iterations of Dow's SiLK material.
Chang also said TSMC was better able to run hundreds of products in a fab for dozens of customers, a feat of logistics that comes from many years of experience. "That is the hallmark of our strength and I believe we are ahead of IBM on that," he said. He also zeroed in on customer service as a strength "built up over many years."
For the six months ended June 30, TSMC's net sales were NT$89,247 million, while net income reached NT$16,088 million, the company said.
"Due to growth in customer demand, TSMC's 2003 second quarter wafer shipments continued to increase, reaching 887,000 eight-inch-equivalent wafers, for a 28 percent increase over last quarter. On a sequential basis, average selling price (ASP) increased four percent due to improving product mix. However, non-wafer-manufacturing sales for the second quarter decreased slightly compared to last quarter," said TSMC spokesperson and senior vice president Harvey Chang.
Harvey Chang also said, "Revenues from TSMC's advanced process technologies, including 0.18-micron and below process technologies accounted for 62 percent of total wafer sales in the second quarter of 2003.
"The 0.13-micron process technology alone accounted for 17 percent of the total sales. In addition, the average utilization rate for the second quarter of 2003 increased to 88 percent from 69 percent for the first quarter of 2003. As a result, gross margin for the second quarter of 2003 improved to 36.8 percent from 26.4 percent in the previous quarter. We expect this fine performance will extend into the coming quarter." |
