TSMC Follows Other Tech Leaders With Strong First Quarter

Taiwan Semiconductor Manufacturing (TSMC) reported its best quarterly net profit in over two years on Tuesday, and raised its market growth forecasts for a number of gadgets, including computers and smartphones.

The stellar performance follows strong quarterly earnings reports from a number of technology companies, including Apple and Intel. TSMC is considered a technology industry bellwether for its size and the range of devices for which it makes chips, and its quarterly earnings reports are watched closely for signs of market health. TSMC is the world's largest contract chip maker, manufacturing chips for global companies such as Texas Instruments, Qualcomm and Nvidia.

"Business at TSMC was very brisk in the past quarter and now," said Morris Chang , chairman and CEO of TSMC, at an investors conference in Taipei.

The company's net profit leaped to NT$33.66 billion (US$1.07 billion) in the first quarter, from NT$1.56 billion during the same period last year. It was TSMC's best quarterly showing since the fourth quarter of 2007, when its net profit reached a TSMC record high of NT$34.49 billion.

TSMC's sales for the first three months of the year rose 133 percent to NT$92.19 billion, beating the top end of its own forecast, which was NT$91 billion. The global chip industry bottomed out in the first quarter last year as the financial crisis hurt global trade.

The company forecast its sales in the second quarter will be between NT$100 billion and NT$102 billion, with a gross profit margin as high as 50 percent. The guidance suggests TSMC will fulfill a promise made by its chairman. Last year, Chang promised that 2010 would be a record year for TSMC in terms of both sales and profit. The NT$100 billion figure would eclipse TSMC's former quarterly sales record of NT$93.86 billion from the fourth quarter of 2007.

The chip maker also raised its in-house forecasts for some electronics products. The company now expects the PC market to grow 17 percent this year over last year, a revision from its previous forecast of 14 percent growth, while the mobile phone market will likely rise 13 percent, up from a prior forecast of 12 percent, and the global semiconductor market will grow 22 percent, up from a previous forecast of 18 percent. The company predicted the contract chip manufacturing business will grow 36 percent this year.

TSMC plans to break ground soon on its third major semiconductor factory, which it calls a gigafab, in Taichung, Taiwan. A gigafab produces chips on up to 100,000 silicon wafers each month when in full production. Chip factories, known as fabs, normally produce chips on around 20,000 to 40,000 silicon wafers per month. The gigafabs were designed to be larger so they could make more productive use of the expensive clean rooms built in all chip factories.

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