Mar. 10, 2008 – Taiwan’s top two foundries, TSMC and UMC, both posted slight declines in February sales vs. the prior month of January, though sales were higher than a year ago (particularly for TSMC). An FBR Research analyst weighs the numbers and trends in a research note.
TSMC reported unconsolidated sales in February were $926.6M, down about 6.3% from January but up nearly 38% from a year ago. Consolidated sales were down nearly 6% M-M and up almost 40% Y-Y. For the first two months of 2008, sales are about 41%-42% ahead of the pace in 2007.
For UMC, the comparisons are also mixed, but a bit less rosy — sales were down 11.3% in Feb. vs. January to $237.9M, and up just a fraction Y-Y to $506.2M.
Barrons blogger Eric Savitz notes one analyst, Normura’s Andrew Beswick, attributed the weak month of sales to a shortened period due to the Chinese New Year, as well as fab maintenance.
TSMC revenues, Feb. 2008
(US $M)
Unconsolidated
Feb. 08……….vs. Jan. 08……………vs. Feb. 07……………Jan-Feb 08……….vs. Jan-Feb 07
926.6……….988.7 (-6.3%)……….671.8 (37.9%)…………..1915.3……………1352.5 (41.6%)
Consolidated
Feb. 08……….vs. Jan. 08……………vs. Feb. 07……………Jan-Feb 08……….vs. Jan-Feb 07
955.9……….1014.3 (-5.8)……….683.9 (39.8%)…………..1970.2…………….1382.1 (42.6%)
UMC revenues, Feb. 2008
(US $M)
Feb. 08……….vs. Jan. 08……………vs. Feb. 07……………Jan-Feb 08……….vs. Jan-Feb 07
237.9………….268.2 (-11.3%)……..236.3 (0.7%)………….506.2……………505.2 (0.2%)
FBR Research analyst Mehdi Hosseini notes that there are some downward revisions to TSMC’s anticipated 1Q and 2Q wafer shipments, roughly down 5%-7%, driven by graphics, some communication, and NOR flash customers. But that’s not enough to prevent buildup of foundry inventories, he cautions — citing as evidence the projected mid-single-digit decline in foundries’ 1Q08 revenues, vs. bigger ~12% reductions by Asian subcontractors on aggregate.
Despite some increasing chatter about downward revisions in TSMC’s 2Q shipments (centered on graphics and wireless customers), the trend indicators still show 2Q wafer shipment growth, and Hosseini warns this means “a more pronounced cut when it actually occurs.” He notes that TSMC’s own historical data shows that when monthly sales top 35% Y-Y growth, customers are mostly likely building excess inventories, which is then followed by a sharp decline in Y-Y sales each month.
For UMC, Hosseini is downgrading his 2008 expectations to EPS $0.09 on sales of $3.16B, instead of $0.12/$3.49B — reductions of 25% and 9%, respectively.
Customers’ excess inventories are expected to lead to order cuts at UMC, though such a shift would be welcome if only to find a bottom to the market, writes analyst Mehdi Hosseini. “For us to become more positive on the foundry segment we need to see the wafer-start cuts, which would suggest that customers have finally started to work down excess inventories, and/or Street expectations are reset.”