Slowdown in chip demand hits TSMC earnings

Slowdown in chip demand hits TSMC earnings

After warning in July that demand for chips was expected to slow, Taiwan Semiconductor Manufacturing (TSMC) reported strong year-on-year profit growth during the third quarter, even as profits fell on a sequential basis. Looking ahead, the company remains cautious and warned that weak demand will be a problem for the next six months.

TSMC, in Hsinchu, Taiwan, reported net income for the third quarter to September 30 of $NT3.16 billion ($US90.6 million), an increase of 156 per cent over the same period last year, when the company posted net income of $NT1.24 billion. Net sales during the third quarter rose 48 per cent over the same period last year, reaching $NT39.84 billion compared to $NT26.94 billion last year.

On a sequential basis, TSMC's earnings looked less rosy, with sales and income falling. Net sales fell 10 per cent during the third quarter from $NT44.18 billion in the second quarter of 2002. Net income fell 66 per cent from $NT9.31 billion during the second quarter.

TSMC expects to resume sequential growth during the second quarter of 2003, with a recovery in demand driven by chips used in communication and consumer applications. Chips used in computers will show milder growth, the company said.

Capacity utilisation rates at TSMC's wafer fabrication plants also fell on a sequential basis, dropping to 79 per cent from a utilisation rate of 85 per cent during the second quarter. Looking ahead, TSMC expects to see its utilisation rate fall to somewhere in the 50 per cent range as demand for chips remains weak.

Slowing demand also forced TSMC to once again trim its capital expenditures forecast for 2002. The company now expects to spend $US1.65 billion on capital expenditures, down from a previous estimate of around $US2 billion.

One bright spot for TSMC is rising demand for its 0.13-micron manufacturing process, the most advanced process that is commercially available from the company. Chips made using the 0.13-micron process accounted for 5 per cent of TSMC's third-quarter sales, up from 1 per cent during the second quarter, it said. Next year, the company said it expects the 0.13-micron process to account for 20 per cent of total sales.

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