TSMC: 2Q revs beat outlook, 3Q looking slower

July 27, 2006 – Taiwan Semiconductor Manufacturing Co. (TSMC) said it earned record profits in its 2Q06, as revenues exceeded the high end of expectations due to strong demand from customers in communications and consumer markets. But inventory concerns have caused the top foundry to pull back its estimates across the board for 3Q.

TSMC said revenues rose 5.5% sequentially to approximately $2.50 billion, up from about $2.37 billion in 1Q and a 37% increase from the $1.83 billion posted in 2Q05. On a sequential basis, revenues from consumer and communication applications increased by 21% and 19%, respectively, while revenues from computer applications declined by 16%. Consolidated net income was about $1.03 billion, up 4.3% sequentially and an 85% leap from the same period a year ago. Gross margin was nearly 52%, vs. 48.5% in 1Q and 40.4% a year ago.

Wafer shipments rose nearly 8% quarter-on-quarter and were up 47% year-on-year. TSMC added about 3% total capacity, including all divisions/subsidiaries and its Singapore-based JV with Philips Electronics, to 1.7 million wafers/month (200mm equivalent). Total group capital spending totaled $664 million during the quarter, mostly to purchase 300mm production equipment.

TSMC predicts 3Q06 results will be flat to slightly lower across the board — revenues in a range of NT$79-$82B, with gross margins between 48%-50%, and operating margins of 39%-41%. “We expect the overall demand in the third quarter to be level or slightly down from the second quarter, in response to the correction of inventory in the supply chain,” said Lora Ho, VP and CFO.

The foundry plans to add another 5.8% capacity (200mm equivalent) in 3Q and another 6.3% in 4Q — including a 20,000 wafers/month ramp each quarter at its new Fab 14 300mm facility, and similar ramp at its 200mm fab in Shanghai — for a total 2006 capacity of more than 7 million wafers/month. TSMC’s total FY06 capital expenditure projections remain unchanged, in a range of $2.6-$2.8 billion.


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