TSMC carries on chip churn
No boutique, a supermarket
Another month, another record. Amid talk of peaking semiconductor cycles and oversupplies of memory chips, Taiwan Semiconductor Manufacturing Co posted another record high monthly revenue last month. The record will do well to last beyond next month's revenue announcement, analysts said, writes Iain Pocock in Taiwan.
TSMC, the largest producer of made-to-order computer chips in the world, announced in a statement earlier today that revenue in August rose 129.3 per cent from the same month last year to NT$16.08 billion on the back of continued growth in the world semiconductor market.
With its production utilisation rate at full capacity for the past eight months, January to August revenue rose 121.6 per cent to NT$96.01 billion, TSMC said. "From our point of view, we still feel demand is very strong, at least stronger than what we can provide," said J H Tzeng, TSMC's chief spin doctor.
Tzeng's feeling is supported by the latest global sales report released on Tuesday by the Semiconductor Industry Association. According to the report, worldwide sales of semiconductors reached a record high $17.3 billion in July 2000, up more than 50 per cent over chip sales in July 1999.
"These sales reflect the fact that semiconductors are being used in ever more interesting, exciting and useful ways," said George Scalise, president of the SIA. "Semiconductors are now being used in applications from optical networks to video games".
Yet words currently seem to be speaking louder than facts. Several recent analysis reports released by international securities houses have fueled concern that semiconductor demand is peaking. Meanwhile, lower than expected demand for mobile phones and fears of an oversupply of memory chips have pared the prices of major memory chip and semiconductor makers.
Steep falls in the stock price earlier this week of bellweather technology stocks in the US such as Micron Technology Inc and Intel Corp were reflected in Taiwan's stock market. Memory chipmakers such as Winbond Electronics Corp and wafer foundry providers TSMC and United Microelectronics Corp have all fallen sharply in recent days.
However, the reality is different, according to TSMC and local securities analysts. "Our production utilization rate has been at more than 100 per cent in August," said TSMC's Tzeng.
Furthermore, with demand from previous orders at TSMC exceeding supply by 60 per cent, analysts are very positive about its future prospects. Lower than expected orders from telecommunications companies means that TSMC remains fully overbooked, just less overbooked than before, said one analyst.
"TSMC has orders booked until the middle of next year," said Ken Chang, an analyst at China Securities Co. Meanwhile, orders from integrated device manufacturers will continue to support foundries' continued growth, he said.
Fears of an overcapacity in the IC industry are also premature, Chang said. Even TSMC's 12in wafer production lines won't start churning out a large number of wafers until the middle of 2002, Chang predicted. In the meantime, the company will have to overcome technical difficulties with the new lines. These are likely to push the cost of 12in wafers above their 8in equivalent to begin with, said Chang.
TSMC is setting up its first 12in wafer production line at its No 6 plant in Tainan. The first wafers will come off the line in December, TSMC's Tzeng said yesterday. "But the number of wafers will be quite limited," he added.
All of which leaves TSMC's stock price looking very attractive. Following recent warnings about the semiconductor industry and the generally bearish market sentiment prevailing in Taiwan at present, the stock is cheap, analysts said. "Our recommendation is to buy," said China Securities' Cheng.
TSMC's stock fell 0.8 per cent to NT$124.5 on turnover of 15.24 million shares. ®