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TSMC up, UMC down in Q2

But both foundries a long way from last year's highs

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TSMC, the world's biggest chip foundry, strengthened its financial position during its second quarter over the previous three-month period, though it still has some way to go to achieve the highs of Q2 FY2004.

Its arch-rival, UMC, the world's second biggest foundry, proved less successful, with sales and profits down sequentially and year on year.

Both firms' sliding revenues were anticipated earlier this month after they published their June sales tallies.

TSMC reported revenues of TWD58.52bn ($1.83bn), up 5.1 per cent on the previous quarter but down 9.8 per cent on the year-ago period. Net income came to TWD18.37bn ($575m), up 9.2 per cent sequentially but down 21.5 per cent year on year. The company reported earnings of TWD0.74 per share.

Wafer shipments rose 14.5 per cent sequentially during the quarter, hindered by a 4.5 per cent fall in average selling prices, TSMC said. Revenue from 90-130nm process lines fell from 45 per cent of the total in Q1 to 43 per cent in Q2. Gross margins rose by less than a percentage point to 39.7 per cent as more capacity was given over to production.

TSMC attributed the sequential gains to "demand recovery from our customers" and noted that it expects this trend to continue through Q3. It said it expects wafer shipments to rise approximately 15 per cent during the current quarter as capacity utilisation rises to beyond 90 per cent. That will push gross margins up 1.3-3.3 percentage points to 41-43 per cent, it forecast. ASP will fall again, "by a low to mid single digit percentage point".

UMC's Q2 FY2005 sales totalled TWD19.44bn ($609m), down 4.2 per cent sequentially and 33.4 per cent year on year. Net income plunged 93.1 per cent sequentially and 97.9 per cent year on year to TWD212m ($6.7m) as the company slipped into red operationally. Earnings fell to a mere TWD0.02 per share.

Still, UMC reckons the worst is over: "We are quite confident we have exited the trough of the downturn," said company CEO Jackson Hu.

Wafer shipments were up 11.7 per cent sequentially, UMC said. Capacity utilisation topped 65 per cent, higher than the 60 per cent utilisation rate UMC had previously predicted. The share of revenues arising from its 90nm process rose from seven to nine per cent. However, ASP fell nine per cent over Q1 FY2005 as demand shifted toward older, larger processes, as it did at TSMC.

Like TSMC, UMC expects wafer shipments to rise by around 15 per cent during Q3, though it also expects ASP to rise slightly. At an operational level, it expects to break even or report a slight loss. ®

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