TSMC slowing down capacity expansion; revises 2011 capex
This time in 2010, TSMC revised upward its annual capex to a record US$5.9 billion as well as raising its forecast for chip market growth for 2010, after posting strong second-quarter results.
TSMC has downgraded capital spending for 2011 to US$7.4 billion from the US$7.8 billion projected earlier in the year, company chairman and CEO Morris Chang said during a July 28 investors conference. TSMC also cut its forecast for foundry market growth for the year to 7% from the 15% anticipated previously, while remaining less positive about the overall semiconductor sector, Chang said.
TSMC earlier in the second quarter already revised downward its growth projections for the 2011 global non-memory semiconductor market to 4% from a previous estimate of 7%.
Inventories throughout the supply chain were five days above the seasonal average as of the end of the second quarter, Chang noted. Inventories had been piled up after the Japan earthquake, but demand growth failed to keep up with the speed of Japan's recovery, unfortunately, Chang pointed out.
With companies managing inventories aggressively, digestion of inventory throughout the supply chain is expected to complete by the end of the third quarter, Chang indicated. But inevitably, TSMC's performance during the third quarter may be affected by the soft economy and supply chain inventory management, Chang said.
TSMC's third-quarter sales are estimated at NT$102-104 billion (US$3.5-3.6 billion), down from NT$110.51 billion in the prior quarter, according to company CFO Lora Ho. Wafer demand in the quarter will be significantly impacted by the less-optimistic outlook of the global economic condition, which has added volatility to the supply chain inventory, said Ho.
Along with the revenue decrease, TSMC's gross margin for the third quarter will also edge down to between 40.5% and 42.5%. CEO Morris Chang attributed the low gross margin estimate, compared to the 50% posted in the third quarter of 2010, to the appreciation of Taiwan's currency and lower utilization rates. The latter cause was due to the foundry's increased capacity, Chang added.
Due to the weakened economic conditions that have caused slower demand for certain technologies, TSMC has revised down its capacity expansion plans for 2011, the company revealed. Current capacity plans call for an overall increase of 17% to 13,248 8-inch equivalent wafers compared with 13,476 units planned previously. Despite the expansion slowdown, TSMC's 12-inch wafer capacity will still go up by 30% in 2011, the company noted.
TSMC reported net profits of NT$35.95 billion on consolidated revenues of NT$110.51 billion for the second quarter of 2011. The earnings translated into an EPS of NT$1.39, showing sequential and on-year decreases.
