Sales up sharply for Taiwanese chipmakers


Despite the revenue increase both TSMC and UMC shares suffered heavy losses

By Ravi Hiranand
CNN Hong Kong

TAIPEI, Taiwan (CNN) -- Taiwan's two major chip foundries this week reported sharp increases in sales for June.

Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, reported an increase of 83.4 percent, over last year.

Rival United Microelectronics Corp. reported a 58.4 percet rise, again compared with last June.

But analysts told CNN on Wednesday that the results, while impressive, had to be put into perspective.

A cell-phone boost

One of the reasons for TSMC's strong performance is the boom in a new breed of Internet-connected mobile phones.

GPRS (general packet radio service) phones provide a cheap and always-on connection to the Internet. TSMC providing the chip sets for most of the major players.

In addition, Motorola announced in June that they would cut 7,000 jobs and outsource much of its production to TSMC.

Putting gains into perspective

Pranab Sarmah of Daiwa Institute of Research said that a year-on-year comparison is misleading. The semiconductor industry claims last year was its worst in history.

Sarmah said he is particularly focused on performance compared with quarterly expectations as a result.

TSMC reported a 23.4 percent revenue rise over the previous quarter, marginally better than the 20 percent analysts expected.

UMC's revenues for this quarter were in line with expectations.

Future growth in question

It also remains to be seen whether both companies can carry these gains over through the next quarter.

Sarmah recently revised his own expectations down for both companies, but still expects TSMC to gain 7 percent in sequential growth and UMC, 14 percent.

Sarmah believes both companies will suffer from weakness at their customers. Mediatech, one of UMC's largest customers, lowered sales expectations.

That is expected to have a knock-on effect on UMC's business.

Analysts are also watching the strength of the Taiwanese dollar, which was trading stronger Wednesday at 33.235 against the U.S. dollar.

TSMC and UMC both suffered heavy losses in trading today, falling 2.1 percent to T$70.00 and 3.91 percent to T$41.80.

The Taiex closed down 2.35 percent to 5,262.01 (Asia roundup). That was its first drop in six days.