September 15, 2006 – Top foundry Taiwan Semiconductor Manufacturing Co. (TSMC) says its inventory backlogs will take a while to adjust, sparking speculation that TSMC’s sales may not rebound by 4Q and that inventory problems may linger into early 2007, according to the Taiwan Economic News. The report noted that CEO Rick Tsai’s comments, made at a recent institutional investor conference, were “a blow to those who believed semiconductor business would rebound in the fourth quarter.”
Some analysts fear TSMC’s earnings in 3Q and 4Q will suffer due to mounting inventory backlogs and competition from UMC which is seen underselling its for high-end process technology offerings. Merrill Lynch, for example, forecasts TSMC’s revenue to dip another 2%-3% sequentially in September, the report noted. And Citigroup Global Markets projects utilization at two of TSMC’s 300mm fabs, Fab 14 and Fab 12, will sink next quarter to 60%-65% and 85%, respectively.
At a previous investor meeting, Tsai suggested world semiconductor revenues would grow 8%-12% in 2006, but now after his more recent statements, analysts are leaning toward the low end of that range, the report noted, adding that nevertheless, other investors believe TSMC’s concern about inventory is a positive sign.