Sales surge drives TSMC profit boost

Who are the customers?

TSMC reckons will now make more than 55 per cent more profit this year than it announced in its most recent forecast.

In September, the world's largest chip foundry forecast pre-tax income would hit NT$6.04 billion ($174.78 million). Now, it believes it will make NT$9.40 billion, an increase of 55.6 per cent on its past estimate.

A surge in orders is behind the change in forecasts. TSMC won't say where they come from, but investors have been quick to single out Nvidia, ordering more chips for Microsoft's Xbox console, which made its US debut earlier this month.

This sounds too much like bandwagon-hopping to us. We expect there are multiple customers behind the increase, including Nvidia's non-Xbox parts, such as nForce, and ATI, which is expected to launch its A3 PC-oriented chipset real soon now.

All TSMC will say is that it expects sales to increase more than 20 per cent on its previous guidance of NT$125.4 billion. TSMC sales grew 11.1 per cent in October.

That still leaves the company performing far less well this year than it did in 2000, however. TSMC's current guidance is for net income of NT$11 billion. In light of the 20 per cent sales boom, it may raise that figure - to NT$14.3 billion, one Lehman Brothers analyst suggests - but that's still well below the NT$65.1 billion the company recorded last year.

Still, it would be a sign that the world chip market is beginning to pick up once more.

"Everyone wants to see if TSMC's revenue growth momentum carries into the first quarter," said Invesco Taiwan fund manager Lloyd Tsai, cited by Bloomberg. "If it does, everyone will think the semiconductor industry has really come back.'' ®

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