TSMC Says Chips Strengthening, Turns Profit in Q1

Taiwan Semiconductor Manufacturing (TSMC) reported its worst net profit since the dotcom bust on Thursday due to slow global demand for chips in the first three months of this year.

But the results were better than expected and TSMC expressed optimism that the technology sector is stabilizing.

The net profit of the world's largest contract chip maker sank 95 percent year-over-year to NT$1.56 billion (US$45.9 million) in the first quarter, while revenue dropped by more than half to NT$39.5 billion from NT$87.5 billion in the same quarter last year.

The global recession ate into demand for the mobile phones, computers, video games and other devices for which TSMC manufactures chips. But the first quarter may mark a bottom for the company's earnings.

"After sharp declines in two consecutive quarters, TSMC is seeing a strong rebound in its second quarter business and believes overall business in the second half of 2009 will be considerably better than that of the first half," the company said in a statement.

TSMC credited the chip rebound to companies launching new products and demand from China spurred by its massive economic stimulus package. Purchases of electronics in the fourth quarter of last year and first quarter of this year were also better than companies had anticipated, leading to a need to replenish inventories.

The chip maker predicted its second quarter revenue will be between NT$71 billion and NT$74 billion and its gross profit margin will expand.

The company said it plans to spend US$1.5 billion on new factories and production line equipment this year. Analysts had expected TSMC to spend US$1.9 billion so the lower figure is interpreted as a sign that the company remains slightly cautious.

To comment on this article and other PCWorld content, visit our Facebook page or our Twitter feed.
Related:
Shop Tech Products at Amazon