China Stimulus Plan Boosts TSMC's First Quarter Sales

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Taiwan Semiconductor Manufacturing (TSMC) reported higher than expected sales for the first three months of the year on Friday, due in part to chip orders tied to part of China's economic stimulus plan aimed at building 3G networks across the nation.

The world's largest contract chip maker, considered a bellwether for the technology industry due to the wide range of products the chips it makes go into, posted sales of NT$39.5 billion (US$1.17 billion) in the first quarter.

The figure beat the high end of its guidance, which was NT$38 billion, but was still down 54.8 percent from the NT$87.48 billion it reported at the same time last year.

Stronger sales at TSMC came as little surprise to analysts because a number of other chip makers, many of them TSMC's customers, had raised their first quarter guidance due to stronger demand from China, including Texas Instruments, Altera and Xilinx of the U.S. and MediaTek of Taiwan.

TSMC manufactures chips designed by most of these companies.

The construction of China's 3G network is a priority alongside the government's 4 trillion Chinese yuan (US$585 billion) economic stimulus package. Beijing handed out 3G licenses to three companies last year, China Mobile, China Telecom and China Unicom.

China is the world's largest mobile phone market in the world, with over 641 million subscribers at the end of last year.

Stronger chip orders prompted TSMC to end unpaid leave for employees at the beginning of April. But the chip maker cautioned at the time that the economic fundamentals had not significantly improved and said it would continue to control costs.

TSMC did not comment on its first quarter sales figures Friday.

The company reported its monthly sales for March on Friday, and added up the first three months of the year to provide the first quarter figure. TSMC's formal first quarter investors' conference will not take place until the end of this month, according to its Web site.

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