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Taiwan Semiconductor reports earnings jump

The world's largest contract manufacturer of semiconductors announces that its second-quarter earnings more than doubled amid strong demand for outsourced chips.

Taiwan Semiconductor Manufacturing, the world's largest contract manufacturer of semiconductors, today announced that its second-quarter earnings more than doubled amid strong demand for outsourced chips.

TSMC said its second-quarter net income was $429.8 million ($13.3 billion TWD), ahead of expectations, on sales of $1 billion. That represents a 122 percent increase in earnings and an 85 percent jump in sales from the same quarter a year ago. Sequentially, sales rose 12.5 percent from the first quarter, with net income up 32.3 percent.

The company's earnings per share more than doubled both for shares on the Taiwanese exchange and for New York Stock Exchange-traded American depository receipts.

"We're on a run rate for what looks like a $5 billion year," said TSMC spokesman Dan Holden. "That's where we're headed, and that's our goal."

However, Merrill Lynch analyst Dan Heyler said in a research note that while earnings surpassed his estimate, TSMC's sales came in nearly 6 percent below his expectations, on lower-than-expected shipments.

TSMC said its capacity utilization was 114 percent in the quarter. Chipmakers can exceed 100 percent because the capacity is based on engineering estimates of how many chips a machine can process in a given time and how much equipment can be put into a wafer plant. TSMC said it has been able to get better performance from its gear and pack in more machines than those forecasts.

TSMC's results reflect the strength of the trend toward outsourced manufacturing, which has led to big business for foundries such as TSMC and rival UMC. Big-name chipmakers such as Motorola have shifted a large chunk of production from their own plants to foundries. In addition, many of the chipmakers in the hottest markets, such as communications, are relative newcomers that rely on foundries for all of their chips.

By the end of next year, TSMC expects to be the single biggest producer of chips, chief financial officer Harvey Chang told investors last week at the Robertson Stephens Semiconductor Conference in San Francisco. TSMC projected that its 2001 volume in wafers will narrowly outpace that of current leaders.

TSMC says it is sixth in chip production, behind such industry heavyweights as Toshiba, Hyundai, NEC, Intel and Hitachi.