Hsinchu, Taiwan – Taiwan Semiconductor Manufacturing Co. (TSMC) posted weaker-than-expected quarterly profits and surprised investors by forecasting things would get worse in the July-September period.
TSMC said it would respond to worsening conditions by cutting this year’s spending on new equipment to less than US$2 billion from a US$2.6 billion budget.
The weak outlook and disappointing results for the April-June quarter showed TSMC, which had soared above the rest of the semiconductor industry in a powerful recovery from 2001, was beginning to run into the same turbulence hitting rivals, reported Reuters.
TSMC earned NT$0.49/share in the quarter, up from NT$0.39 in the first three months of the year and against NT$0.01 in the same period a year ago, but fell short of analyst estimates of NT$0.56/share.
The first hint of bad news was Chairman Morris Chang’s decision to personally lead TSMC’s quarterly briefing to investors, after saying he would hand duty to other management after getting the company on an even keel last September. “Now that the business climate looks like it is getting weaker, I’m back,” Chang said.
Chang said he expected third quarter shipments to drop by a single digit percentage from the second quarter and ASPs to fall 5% — making it impossible for TSMC to show quarter-on-quarter revenue growth.
Chang said that falling demand combined with rising capacity would cut TSMC’s capacity utilization rate to just over 70% in the quarter ending in September, from 85% in the second quarter. The utilization rate was 67% in the first quarter.
Chang said corporate accounting scandals in the United States had dealt an unexpected blow to consumer confidence. “I think the reason why we see business conditions getting worse has a lot to do with this.”
Doing his part to restore confidence, Chang said TSMC’s board of directors and supervisors would form an auditing committee with independent directors, including MIT economist Lester Thurow and former BT Group Plc CEO Peter Bonfield. TSMC’s outside accountants hired to audit its books would work for the auditing committee instead of company management.
Furthermore, Chang was confident business would improve sooner rather than later. “What we are seeing is a pause in the recovery. I strongly believe that the recovery is here,” he said.