TSMC’s Chang turns conservative for Q3

Michelle Hsu, The China Post

This was the first time that Chang made a conservative third quarter prediction. He made the comments during a seminar speaking about TSMC’s operations during the second quarter. Earlier, during the company’s annual shareholders meeting, Chang had been optimistic about the rest of the year as saying, “The international IC market will turn better month after month.” He even said that TSMC would perform much better during the second half on the recovering international market. However, the conservative attitude Chang expressed during yesterday’s seminar was commonly regarded as a signal for TSMC to revise its forecast for the other two quarters of this year.

Yesterday, TSMC reported an after-tax earnings of NT$15.89 billion for the first half of this year, with an EPS (earnings per share) of NT$0.84. Institutional investors yesterday dumped TSMC shares on concerns that its major clients such as nVidia and ATI had been decreasing sales of their products. There is only a slim chance that the situation will better in the short term. An European investment bank even revealed that nVidia had sharply reduced its orders for TSMC for the fourth quarter.

TSMC had previously predicted a near full capacity use of its 0.18mm production facilities for the last two quarters, but Chang failed to confirmed that prediction yesterday. The sharp revenue growth of 41.3 percent in the second quarter may reflect an over-optimistic market sentiment in the earlier months. However, the third quarter may not do so well amid the current prevailing pessimism.

The drop in TSMC share prices yesterday led dozens of major electronics shares to also tumble. Selling pressure on the electronics sector rose during the last 15 minutes when the market saw increasing bidding for short sales of major electronics shares.

Despite the gloomy market prospect, TSMC has become the world’s ninth largest IC manufacturer in terms of the first-held sales, according to a recent Bloomburg report. Its previous ranking was 15th.