TSMC Q1 revenue falls 17% y/y

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 4/26/2007

Due to inventory correction and seasonal effects, Hsinchu, Taiwan-based semiconductor wafer foundry leader Taiwan Semiconductor Manufacturing Co. (TSMC) today reported revenue for its Q1 ended March 31 of $2 billion (64.9 billion Taiwanese dollars), down 16.6 percent from Q1 2006, and 13.4 percent sequentially lower from Q4 2006.

The foundry reported Q1 net income of $567.5 million (18.8 billion TWD), down 42.2 percent from Q1 2006, and 32.5 percent lower sequentially.

Diluted earnings per share for Q1 was 11 cents per ADS unit (73 TWD cents), down 42.3 percent from Q1 2006, and down 32.5 percent sequentially.

Advanced process technologies (0.13-micron and below) accounted for 49 percent of TSMC’s wafer revenues with 90-nm process technology accounting for 22 percent and 65-nm about 1 percent of total wafer sales.

Q1 gross margin of 37.9 percent reached the mid point of the guidance, while operating margin of 27.5 percent was close to the high end of guidance. Net margin decreased 8.2 percentage points to 29 percent from Q4 2006.

The company noted that consolidated net sales exceeded the high end of its guidance mainly due to better than expected exchange rates and an increase in revenues from our subsidiaries.

On a sequential basis, revenues from all three applications declined: revenues from computer, communications and consumer applications declined by 21, 15 and 12 percent, respectively.

Revenues from 65-m and 90-nm accounted for about 23 percent of total wafer sales, flat from Q4 2006. Revenues from advanced technologies (0.13- micron and below) accounted for 49 percent of total wafer sales, up one percent from Q4 2006.

Revenues from IDM customers accounted for 30 percent of total wafer sales during Q1, compared to 28 percent in Q4 2006.

Consolidated gross profit for Q1 $741 million (24.6 billion TWD), or 37.9 percent of net sales, down from a gross profit of $1 billion (34.5 billion TWD), or 46 percent of net sales, in Q4 2006.

The gross margin declined by 8.1 percentage points largely due to lower capacity utilization, lower average selling price, an increase in depreciation expenses, and a lower provision for sales returns in Q4 2006, the company said.

Looking ahead to Q2, Lora Ho, VP and CFO of TSMC said in a statement, “A majority of our customers’ excess inventory has been worked through in the first quarter and the recovery of our business is already in place. Relative to the first quarter, the communication and consumer segments will rebound quite well while the computer segment will grow at a lower pace.”

Based on its current business outlook, TSMC expects Q2 revenue to be between $2.2 and $2.3 billion (73 and 75 billion TWD), gross profit margin to be between 42 and 44 percent and operating profit margin to be between 32 and 34 percent.

TSMC’s closest competitor UMC is expected to release its Q1 report on May 2.