Stormy forecast for Taiwan chipmakers

Taiwan's TSMC and UMC, which together domainate the global market for contract chips, issued bleak forecasts for 2001

In this story: Mixed signals Bottom of the cycle RELATED STORIES, SITES

By Staff and wire reports

TAIPEI, Taiwan -- The world's top two contract chipmakers expect this year's profits to fall far below last year's earnings.

Taiwan Semiconductor Manufacturing Co. (TSMC) said on Monday it expects net profits of $780 million this year, against $2 billion in 2000.

Taiwan's number-two chipmaker United Microelectronics Corp. (UMC) forecast net earnings of $406 million this year, tumbling from $1.6 billion in 2000.

Mixed signals

Analysts said TSMC's forecast was roughly in line with market expectations after it announced on Friday that first quarter profits slipped 16 percent year-on-year and warned sales would tumble 26 percent in the April-June period from the previous three months.

However, UMC's weak 2001 forecast surprised most analysts, after the company's January-March net profits of $197 million.

TSMC chairman Morris Chang by contrast has said he saw signs that "spring was coming," and forecast a gradual quarter-on-quarter improvement beginning in the second half.

"These two companies are sending out very mixed signals to the market," said Chris Hsieh, semiconductor analyst for ING Barings in Taipei.

"TSMC is probably looking at a very strong second half, while UMC is painting a very cautious stance," Hsieh said.

Bottom of the cycle

In an analyst conference on Monday, UMC chairman John Hsuan took a far more wary tone than his counterpart at TSMC.

"Right now we are in the middle of a valley. As for when the recovery will come, we are very unsure," Hsuan said. 'But the future recovery will not be a strong rebound, and could be instead a slow zigzag rise," he said.

Hsuan also warned he expected second quarter sales to fall 30 percent from the first quarter's $718 million.

He said the company's closely-watched capacity utilization rate, a key indicator of orders for made-to-order chip manufacturing services, could fall as low as 50 percent in the second quarter from a current 70 percent.

UMC's first quarter results and forecasts came after close of trade on Monday. The stock gained T$1.00, or 1.94 percent, to close at T$52.5, while TSMC shares added T$4.00, or 4.6 percent, to end at T$91.

Both shares outperformed the broad TAIEX index, which slipped 0.65 percent. Taiwan's stock market was closed Tuesday for the Labor Day break.

Analysts said they expected investors -- many of whom are looking for opportunities to snap up semiconductor shares at their lows -- to accentuate the positive when trading resumes Wednesday in Taiwan.

"Most analysts will say the second quarter is the real bottom of this cycle," said Milton Huang, semiconductor analyst at National Securities.

Reuters contributed to this report.

TSMC, UMC tumble on chip downturn
April 10, 2001

UMC
TSMC

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