TSMC raises tech industry forecasts amid Q2 rebound

IDG News Service - Taiwan Semiconductor Manufacturing (TSMC) altered its projections for several segments of the electronics business after its chip revenue and net profit soared in the second quarter.

The chairman of the world's largest contract chip maker revised TSMC's estimates for technology segments including the global PC industry, to a 4 percent decline year-on-year from a previous forecast for an 8 percent decline. In handsets TSMC now expects just a 9 percent year-on-year contraction, rather than the 12 percent forecast previously. He said TSMC had also increased its projections for consumer electronic devices and global chip industry revenue due to an apparent recovery in electronics demand.

"It is a very changed picture from what we saw six months ago or even three months ago," said Morris Chang, chairman of TSMC, during the company's quarterly investors conference in Taipei on Thursday.

TSMC is considered a technology bellwether due to the variety of chips it manufactures for customers, which go into gadgets ranging from mobile phones and computers to game machines and DVD players.

Since chips are the building blocks of all information technology and communications gadgets, the company gains a unique view of the overall health of the sector from its business.

TSMC's revenue fell 15.8 percent year-on-year to NT$74.21 billion (US$2.26 billion), but the figure was up 88 percent from the recession-gripped first quarter's NT$39.50 billion. Net profit fell 15 percent compared to the same time last year to NT$24.44 billion, but that figure was up from NT$1.56 billion in the first quarter.

JP Morgan analyst Bhavin Shah called the results a "positive surprise."

TSMC expects business to continue to improve. Revenue in the third quarter is expected to reach as high as NT$90 billion as TSMC's gross profit margin expands.

"We are guiding for the third quarter to be up 20 percent from the second quarter," said Chang, adding that he's "much more upbeat about the fourth quarter than I was even three months ago."

TSMC's increased optimism echoed that of rivals including United Microelectronics (UMC) and Chartered Semiconductor. All three companies raised their 2009 equipment and factory spending plans. TSMC increased its capital spending plan to US$2.3 billion from US$1.5 billion previously, while UMC increased its to US$500 million from US$400 million and Chartered raised its spending plan to US$500 million from US$375 million.

TSMC will also spend more money on research and development this year and in the future, Chang said. The company has traditionally set aside around 6 percent of revenue for R&D, but this year the amount will be around 7.8 percent and hereafter will remain between 7 percent and 8 percent of revenue.