TSMC posts sequential sales, income gains for Q3; plans 2008 capex cut

By Colleen Taylor, Contributing Editor -- Electronic News, 10/25/2007

Sales were strong in Q3 for Taiwan-based semiconductor manufacturing foundry giant Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), which announced today consolidated revenues of  today announced consolidated revenue of $2.73 billion ( 88.96 billion Taiwanese dollars), up 7.9 percent year-over-year and up 18.7 percent from Q2.

The Q3 performance at the company's bottom line, however, was not as solid. TSMC posted net income of $932.1 million (30.4 billion TD), down 6.5 percent year-over-year yet a 19.2 percent boost from Q2.  Gross profit margin for Q3 was 46 percent, down from 50 percent in Q3 2006, but up from 43 percent in Q2.

The company also said in an earnings call today that by year end it will have spent about $2.6 billion on capital expenditures; the company's CEO Rick Tsai also said it plans to spend "significantly less" than that in 2008, but declined to provide specific figures on its projected 2008 capex. 

Tsai was quick to note that the cut in spending does not reflect any cautiousness on its part about the chip industry; rather, TSMC invested so heavily in its 65 and 90 nm capacity during 2007 that little further investment would be needed in 2008.

Indeed, the company saw the majority of its Q3 sales from advanced process technologies at 0.13 micron and below, which accounted for 56 percent of wafer revenues. TSMC said that 90 nm process technologies accounted for 27 percent of those sales, while 65 nm accounted for seven percent of those sales.

Despite the year-over-year income drop, TSMC expressed overall satisfaction with its results, which were in line with projections the company had made last month. "Third quarter set a record for our business in terms of revenues and wafer shipment, where all our three major market segments- communication, computer, and consumer- saw double-digit growth sequentially, " Lora Ho, TSMC's VP and CTO, said in a statement.

Looking ahead to Q4, TSMC said it expects the demand from computer related applications to grow the strongest, followed by communication related applications, whereas consumer applications will decline, due to their "seasonal pattern," Ho said. The company expects Q4 revenue is expected to be between $2.82 and $2.88 billion (92 and 94 billion TD), while gross profit margin is expected to be between 46 and 48 percent.