TSMC Follows UMC’s Q3 Lead, Warns of Weaker Q4

By Colleen Taylor -- Electronic News, 10/26/2006

Taiwan Semiconductor Manufacturing Co. Ltd. today followed rival UMC’s lead, announcing raised revenue for Q3, but weaker projections for Q4 due to a continuing inventory correction.

Chalking up the quarter’s growth to better than expected demand in computer related applications, foundry giant TSMC reported Q3 revenues of $2.48 billion (82.48 billion new Taiwanese dollars), up 0.4 percent over Q2 and up 17 percent from Q3 2005.

Of that, advanced process technologies at 0.13-micron and below accounted for 49 percent of wafer revenues, while revenues from 90nm process technology alone were 24 percent of the total wafer sales, TSMC said.

The Hsinchu, Taiwan-based foundry further posted Q3 net income of $977 million (32.49 billion TWD), down 4.4 percent from Q2 but up 32.7 percent from the year ago quarter, with gross margin at 49.9 percent and operating margin 40.8 percent. Net margin decreased 2 percentage points to 39.4 percent from the previous quarter.

Looking ahead to Q4, TSMC is expecting a slowdown, as some analysts have predicted.

"The current inventory correction, which started in Q3, is expected to continue during the Q4," Lora Ho, VP and CFO of TSMC, said in a statement. "We expect the overall demand in all three major segments to decline sequentially."

The company forecasts revenue to be from $2.2 billion to $2.28 billion (74 billion to 76 billion TWD), with a gross profit margin between 45 percent and 47 percent and operating profit margin between 35 percent and 37 percent.

Meanwhile, second-ranked foundry UMC posted a strong Q3 earlier this week, with sales of $842 million (27.85 billion TWD), up 8.2 percent from Q2 and up 18.1 percent over Q3 2005. Like TSMC, however, UMC is bracing for a bleaker Q4, with wafer shipments projected to decrease by 2 percent to 3 percent and wafer average selling prices expected to fall by 5 percent to 6 percent.