TSMC profits plunge 98%

TSMC is betting on a major recovery in the semiconductor market over the next six months to save it from plummeting profits and spiralling costs.

The world's largest chip foundry today posted net income of NT$312 million ($8.97 million), down 98 per cent on the NT$13.35 billion it posted this time last year. Earnings fell from NT$1.13 per share to NT$0.01.

Sales fell 17 per cent from Q2 2000's NT$31.8 billion to this quarter's NT$26.3 billion. Sales were down 34 per cent on the first quarter.

TSMC's costs went the other way. Q2 2001's operating expenses grew to NT$4.7 billion, up 109 per cent on Q2 2000's figure of NT$2.26 billion.

The company's costs have risen dramatically thanks to its investment in 300mm wafer fabs. Infineon was this week hit by the same factor - it intends to maintain development, however, because of the 30 per cent boost to yield the new technology is expected to offer.

The recovery isn't going to happen any time soon. Certainly TSMC expects its capacity utilisation - a key measure of how much money a foundry is making - to fall to 40 per cent during Q3 from Q2's 44 per cent (which is bad enough).

TSMC said it "hit bottom" in May and June and it expects sales to improve through the rest of 2001. Investment in new technology isn't likely to change much, either. Clearly TSMC wants to be ready to run with the latest fabs when the slump ends.

The company didn't announce any cost-cutting measures, and given chairman Morris Chang's statement made earlier this week that he would sooner cut investment spending than lay off staff. ®