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October 28, 2010, 6:28 AM EDT
By Tim Culpan
Oct. 28 (Bloomberg) -- Taiwan Semiconductor Manufacturing Co., the world?s largest contract manufacturer of chips, forecast fourth-quarter sales and profitability that beat analysts? estimates as demand for electronics climbs.
Revenue will be at least NT$107 billion ($3.5 billion) in the three months ending Dec. 31, the Hsinchu, Taiwan-based company said today. That surpasses the NT$104.7 billion average of 18 analyst estimates compiled by Bloomberg. TSMC posted a 54 percent increase in third-quarter net income to NT$46.9 billion, beating analysts? estimate of NT$40 billion.
TSMC joins smaller rival United Microelectronics Corp. in forecasting a better-than-expected outlook as demand for electronics including smartphones improves. The company?s spending on equipment in 2011 will rise above this year?s record $5.9 billion budget as revenue growth exceeds an estimated 14 percent gain for the custom-chip market, TSMC said.
?There?s still considerable demand that we cannot schedule production for,? Chairman and Chief Executive Officer Morris Chang said at an investor conference in Taipei.
Gross margin, a measure of profitability that tracks sales less the cost of goods sold, may be as much as 50 percent, TSMC said. That surpasses the median 47.6 percent estimate of six analysts surveyed by Bloomberg News.
The current quarter?s sales and profitability would be higher if not for an appreciation of the Taiwan dollar, Chang said. Taiwan?s currency has gained 2.4 percent against the U.S. dollar in the past month, according to Bloomberg data.
Currency Appreciation
The projected fourth-quarter performance is based on an assumption that the local currency may gain more than 4 percent against the U.S. dollar this quarter to NT$30.60, TSMC said in a statement. Sales would be as high as NT$113 billion if not for the exchange rate impact, Chang said.
Third-quarter sales climbed 25 percent to NT$112.3 billion, surpassing the company?s guidance of as much as NT$111 billion. Revenue from chips used in communication products climbed 13 percent from the prior quarter, those in consumer electronics increased 4 percent, and PC chips dropped 7 percent, TSMC said.
?Smartphones are so strong that it offsets concerns of weakness in other areas,? said Warren Lau, who rates TSMC ?sell? at Samsung Securities Co. in Hong Kong. ?Industry expectations had been that the PC area would be quite bad, dragging the chip sector down.?
TSMC rose 1.1 percent to NT$62.70 at the 1:30 p.m. close in Taipei trading before the earnings announcement. The stock has lost 2.8 percent this year, while the benchmark Taiex index has climbed 2 percent.
Profit Growth
Sales and net profit will increase at least 40 percent this year, Chang said Sept. 16. Revenue and pretax profit will rise 10 percent next year, he said at the time.
Global chip industry revenue growth will climb 5 percent in 2011, Chang said today.
TSMC?s new businesses of solar panels and light-emitting diodes will begin contributing ?significant revenue? from 2012, Chang said.
Chang, 79, is boosting spending on equipment and research to stay ahead of competition from Globalfoundries Inc. and Samsung Electronics Co., which are also seeking to increase their share of the contract chip-making market. Globalfoundries, the manufacturer spun off from Advanced Micro Devices Inc., expects its sales to rise at least 40 percent this year, Chief Operating Officer Song Hwee Chia said this month.
UMC, based in Hsinchu, posted profit yesterday that beat estimates and predicted profitability would surpass analyst projections because of demand for devices such as smartphones.
Smartphone shipments will climb 55.4 percent this year, 10 percent more than previously projected, to about 270 million units, researcher IDC said Sept. 7.
STMicroelectronics NV, Europe?s largest semiconductor maker, on Oct. 26 forecast fourth-quarter sales that beat analysts? estimates, citing an order backlog and demand for chips used in cars and consumer products.
--Editors: Lena Lee, Suresh Seshadri.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.
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Oct. 28 (Bloomberg) -- Taiwan Semiconductor Manufacturing Co., the world?s largest contract manufacturer of chips, forecast fourth-quarter sales and profitability that beat analysts? estimates as demand for electronics climbs.
Revenue will be at least NT$107 billion ($3.5 billion) in the three months ending Dec. 31, the Hsinchu, Taiwan-based company said today. That surpasses the NT$104.7 billion average of 18 analyst estimates compiled by Bloomberg. TSMC posted a 54 percent increase in third-quarter net income to NT$46.9 billion, beating analysts? estimate of NT$40 billion.
TSMC joins smaller rival United Microelectronics Corp. in forecasting a better-than-expected outlook as demand for electronics including smartphones improves. The company?s spending on equipment in 2011 will rise above this year?s record $5.9 billion budget as revenue growth exceeds an estimated 14 percent gain for the custom-chip market, TSMC said.
?There?s still considerable demand that we cannot schedule production for,? Chairman and Chief Executive Officer Morris Chang said at an investor conference in Taipei.
Gross margin, a measure of profitability that tracks sales less the cost of goods sold, may be as much as 50 percent, TSMC said. That surpasses the median 47.6 percent estimate of six analysts surveyed by Bloomberg News.
The current quarter?s sales and profitability would be higher if not for an appreciation of the Taiwan dollar, Chang said. Taiwan?s currency has gained 2.4 percent against the U.S. dollar in the past month, according to Bloomberg data.
Currency Appreciation
The projected fourth-quarter performance is based on an assumption that the local currency may gain more than 4 percent against the U.S. dollar this quarter to NT$30.60, TSMC said in a statement. Sales would be as high as NT$113 billion if not for the exchange rate impact, Chang said.
Third-quarter sales climbed 25 percent to NT$112.3 billion, surpassing the company?s guidance of as much as NT$111 billion. Revenue from chips used in communication products climbed 13 percent from the prior quarter, those in consumer electronics increased 4 percent, and PC chips dropped 7 percent, TSMC said.
?Smartphones are so strong that it offsets concerns of weakness in other areas,? said Warren Lau, who rates TSMC ?sell? at Samsung Securities Co. in Hong Kong. ?Industry expectations had been that the PC area would be quite bad, dragging the chip sector down.?
TSMC rose 1.1 percent to NT$62.70 at the 1:30 p.m. close in Taipei trading before the earnings announcement. The stock has lost 2.8 percent this year, while the benchmark Taiex index has climbed 2 percent.
Profit Growth
Sales and net profit will increase at least 40 percent this year, Chang said Sept. 16. Revenue and pretax profit will rise 10 percent next year, he said at the time.
Global chip industry revenue growth will climb 5 percent in 2011, Chang said today.
TSMC?s new businesses of solar panels and light-emitting diodes will begin contributing ?significant revenue? from 2012, Chang said.
Chang, 79, is boosting spending on equipment and research to stay ahead of competition from Globalfoundries Inc. and Samsung Electronics Co., which are also seeking to increase their share of the contract chip-making market. Globalfoundries, the manufacturer spun off from Advanced Micro Devices Inc., expects its sales to rise at least 40 percent this year, Chief Operating Officer Song Hwee Chia said this month.
UMC, based in Hsinchu, posted profit yesterday that beat estimates and predicted profitability would surpass analyst projections because of demand for devices such as smartphones.
Smartphone shipments will climb 55.4 percent this year, 10 percent more than previously projected, to about 270 million units, researcher IDC said Sept. 7.
STMicroelectronics NV, Europe?s largest semiconductor maker, on Oct. 26 forecast fourth-quarter sales that beat analysts? estimates, citing an order backlog and demand for chips used in cars and consumer products.
--Editors: Lena Lee, Suresh Seshadri.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.
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