Taiwan Semi profits down 98% for Q2

Taiwan Semiconductor Manufacturing Co (TSMC) has been hit by falling sales and rising costs, but still managed to stay in the black for its second quarter.

TSMC reported net profit of NT$312 million (US$8.99 million), or one NT cent a share. This is a 98 percent drop from the year ago period, when it earned NT$13.35 billion (US$383 million), or NT$1.33 (US$0.0383) a share.

The chipmaker's profits have evaporated as mobile phone makers and PC manufacturers, its main customers, have cut back on production in the face of slumping sales.

TSMC, the No 1 maker of custom chips, saw Q2 sales fall by 17 per cent to NT$26.3 billion (US$0.755 billion) from NT$31.8 billion (US$0.911 billion) a year ago.

At the same time, operating costs rose 109 per cent to NT$4.7 billion (US$135.2 million) in the second quarter from NT$2.26 billion (US$64.9 million) in the year ago period.

However, while research firm IC Insights Inc sees global chip demand falling by as much as 21 percent this year to US$139.2 billion, TSMC is not planning to slash its headcount, following some aggressive expansion last year, where it increased its capacity by 80 percent.

One reason for optimism is the upcoming release of Microsoft's Xbox game console, which will require graphics chips. Nvidia, which produces the Xbox chips, is predicted to order the equivalent of 30,000 wafers per month, Jeff Chang told Bloomberg. Chang manages NT$5 billion (US$144 million) with Capital Investment Trust Corp, and holds TSMC shares. "'The third quarter is the bottom," he declared.

TSMC's third quarter fortunes will rest on whether it can improve its use of production capacity, and on the price of its chips.

There is some room for the price of its products to improve, as the chipmaker is one of less than 10 such companies with the facilities to make 300mm silicon wafers. The average selling price of its chips in the second quarter rose on the back of a 65 per cent increase in wafers using the new technology.