InvestIdeas

Taiwan's UMC says Sept sales fall 23.6 percent

TAIPEI, Oct 8 (Reuters) - Taiwan's UMC <2303.TW>, the world's No. 2 contract chip maker, said on Wednesday its September sales fell 23.6 percent from a year ago, declining for a fourth straight month, as a slowing global economy hurt tech demand.

Sales at United Microelectronics Corp (UMC) fell to T$8.052 billion ($249 million) last month from T$10.542 billion in the same month a year ago, the company released the figures on its website.

UMC's sales were T$8.165 billion in August.

The results came after the Taipei stock market closed on Wednesday. UMC shares dropped 6.95 percent to their daily limit, while the main TAIEX share index <.TWII> slid 5.76 percent.

China semi sales to grow 6.7 pct in '08 -iSuppli

TAIPEI, Nov 19 (Reuters) - Sales of China's semiconductor makers are expected to rise 6.7 percent to $81.7 billion this year, driven by domestic sales of wireless and consumer electronics products, market research firm iSuppli Corp said.

China's fabless integrated circuit (IC) industry, crowded with more than 550 companies, is expected to outperform with a 12.3 percent rise in sales to $3.5 billion in 2008, up from $3.1 billion in 2007, iSuppli said in a statement published on Tuesday.

"This growth in fabless IC revenue is being driven by domestic sales of wireless and consumer electronics products, rather than by exports," Vincent Gu, an iSuppli analyst in China, said in the statement.

Gu added that the Beijing Olympics had encouraged the release of new handsets supporting the 3G standard, boosting sales of associated ICs in China, home to top domestic contract chipmaker Semiconductor Manufacturing International Corp <0981.HK> .

Despite the economic uncertainty, iSuppli forecast sales of China's fabless IC market would grow further to $4.1 billion in 2009 and $5.1 billion in 2010. No forecast for the entire China semiconductor market was given.

Taiwan's TSMC, UMC planning big cost cuts

The world's top two contract chip makers, TSMC and UMC, are preparing to cut costs up to 20 percent, as their industry heads into a sharp downturn, industry sources said.

TSMC had told department heads they may have to cut costs by 20 percent in the near future, through lay-offs or by making people take mandatory unpaid leave, two industry sources close to the company said.

UMC had told employees they may be forced to do a four-day week in the near future, and take their usual fifth work day as unpaid leave, said another industry source with knowledge of the situation.

That move would save the company an estimated 15-20 percent in costs, the source said.

REUTERS

TSMC cuts Q4 sales and margin forecasts

TAIPEI - TSMC, the world's top contract chip maker, cut its fourth-quarter sales and profit margin forecasts on Monday, blaming weaker shipments caused by the slowdown in the global economy.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) slashed its fourth-quarter consolidated sales forecast to between T$63 billion (US$1.9 billion) and T$65 billion from a previous forecast of T$69 billion to T$71 billion made in late October.

The new sales forecast is about 30 per cent lower than TSMC's sales in the third-quarter.

'(That's) due to a reduction of wafer shipments resulting from continuing weakness in global economic conditions,' TSMC said in a statement.

TSMC also cut its forecast for its gross profit margin in the October-December quarter to 30-32 per cent and trimmed its estimate for its operating profit margin to 17-19 per cent, lower than its previous forecast by 4 percentage points each.

The revision came after the Taipei stock market closed on Monday. Shares of TSMC were unchanged and those of smaller local rival UMC fell 1.2 per cent, against the main TAIEX share index's 1.3 per cent gain.

Taking about a two-thirds share of the global foundry market together, the two Taiwan firms are facing the economic slowdown that has forced consumers to cut spending on new computers, cellphones and flat-screen TVs that require microchips.

TSMC has already imposed a hiring freeze and industry sources close to the company said last week TSMC had told department heads they may have to cut costs by 20 percent in the near future, through lay-offs or by making workers take mandatory unpaid leave.

In October alone, TSMC's sales dropped 10.6 per cent from a year earlier, its worst decline in a year and a half. UMC said its sales dropped 21.9 per cent for the month, following similar drops in the previous two months. -- REUTERS

TSMC Nov sales down 36 pct y/y in chip downturn

TAIPEI, Dec 10 (Reuters) - TSMC <2330.TW>, the world's biggest contract chip maker, said on Wednesday its November sales fell 36 percent from a year ago in a slowing economy that has hurt demand for PCs and consumer gadgets that use chips.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) had unconsolidated sales of T$19.3 billion ($576 million) last month, down from T$30.14 billion a year ago and T$28.37 billion in October.

TSMC and smaller cross-town rival UMC <2303.TW> have recently cut their fourth-quarter sales and margin forecasts on weakening technology demand.

TSMC announced the sales results as the Taipei stock market closed on Wednesday. TSMC shares rose by the daily 7 percent limit and UMC shares gained 4.4 percent, outpacing the main TAIEX's <.TWII> 4.2 percent rise.

Latest report on inventory levels in the semiconductor sector. Industry guys will base on this to estimate how long the pain in the sector will last. Given this higher than estimated inventory by year end, looks like the pain will last longer than expected. Key reason is demand has been weaker than expected. So when companies projected their inventories based on inventory turn, they actually overestimated production.

Looks like a longer than expected winter is a reality. You will see futher downgrade of the semicon and the tech sector ....

Excess semiconductor inventory to triple, says iSuppli
Press release, December 17; Jessie Shen, DIGITIMES [Wednesday 17 December 2008]

Excess semiconductor stockpiles in the global electronics supply chain are likely to nearly triple in the fourth quarter of 2008, spurring iSuppli to issue a red alert regarding chip inventory levels.

Excess semiconductor inventories are projected to balloon up to US$10.2 billion in value during the fourth quarter of 2008, up 268% from US$3.8 billion at the end of the previous quarter. This rise is having a deleterious impact on semiconductor pricing, revenues and profitability, and could delay the semiconductor industry's recovery from the current downturn—even when demand rebounds.

This represents the first time that iSuppli has issued a red alert on semiconductor inventory levels. iSuppli issued a yellow alert warning on semiconductor inventory in July of 2004, in light of a major surge in stockpiles in the third quarter of that year.

"Three critical factors are driving semiconductor inventories to a higher level than expected," said Derek Lidow, president and CEO of iSuppli. "First, many companies have reduced inventory targets during the fourth quarter, even as revenues are plummeting," Lidow noted.

Inventory targets often are expressed in terms of days-of-inventory (DOI), and these targets rarely change. However, inventory levels fluctuate proportionally with changes in forecasted revenues.

In the fourth quarter, many industries have reset their inventory target levels in anticipation of a long economic downturn, expecting that the reduced stockpile goals will help their cash balances. These new targets mean that even if semiconductor revenues were anticipated to remain flat, inventory levels would need to drop in proportion to the new lowered DOI targets in order not to have any "excess" inventory at that node of the supply chain.

"The second factor is that semiconductor demand has fallen in the fourth quarter, and it declined much faster than expected at the end of the third quarter, as shown by a rash of lowered guidance announcements," Lidow added. "This means that initial fourth-quarter production schedules were set too high. Production schedules have been ratcheted down during the quarter in what are mainly reactive moves, resulting in excess inventory buildup.

"Third, OEMs have not been able to cut production as fast as they would like to due to supply chain rigidities, mostly because of workforce rules in some parts of the globe and cancellation windows at subcontractors and component suppliers."

Extended time

The near-tripling of excess semiconductor inventory throughout the electronics supply chain in the fourth quarter will significantly extend the time necessary for the semiconductor industry and contract manufacturers to benefit from any recovery in demand. It also will wipe out several additional percentage points of growth from the semiconductor industry in 2009.

iSuppli's methodology, developed in 2001, involves estimating the value of excess semiconductors throughout the electronics value chain, whether in component inventories, work in progress (WIP) or as part of intermediate or finished products. iSuppli has determined that the level of excess semiconductor inventories is the factor that most directly relates to future electronic industry production levels.

Retailers

Retailers likely will not build up major excess inventories of finished products in the fourth quarter. iSuppli sources indicate that retailers are planning to price inventory at whatever levels are required to hit their January inventory targets, or in the case of Wal-Mart and a few of the mega-chains, to return unsold stock. In most cases, retailers did not significantly reset their target inventory levels, and instead have focused on OEMs giving price protection or return privileges.

Similar to retailers, wireless service providers also are not likely to build up significant additional inventories, and are modestly targeting reduced inventory levels. They have been ordering smaller lots to be shipped in the fourth quarter, with return privileges or price protection on unsold inventory.

PC OEMs have been particularly aggressive in setting lower inventory targets and also in pushing out build schedules and component orders. These companies will reduce overall inventories by several billion dollars, and these cancellations and production cuts will show up as inventory increases further upstream in the supply chain.

The PC OEMs will, however, show an increase in excess semiconductor inventory of US$1 billion because they had been running below their old targets; now they will be running slightly above their new targets.

Everything in excess

OEMs producing products destined for consumers, whether consumer electronics, mobile handsets or automotive electronics and infotainment, will accumulate major excess inventories, both from resetting their target inventory levels and also from production they could not cut fast enough. iSuppli expects significant jumps in excess inventory in these three areas, with the automotive supply chain adding up to US$1.7 billion in surplus semiconductor stockpiles. Wireless OEMs and consumer product makers, including companies that produce both consumer and non-consumer items, should see their overall product inventories increase by US$2.4 billion, adding US$300 million to iSuppli's tally of excess semiconductor inventories.

ODMs also are resetting target inventory levels and will be forced to hold some PC and consumer electronics shipments in inventory, resulting in an increase of about US$1.1 billion in stockpiles by the end of the fourth quarter, and adding almost US$200 million to the excess semiconductor inventory count.

EMS suppliers were holding excess inventories at the end of the third quarter, but have been particularly aggressive, often as a matter of survival, about pushing out orders while tightening inventory targets. This will result in a drop of more than US$1 billion in absolute inventories, but will still slightly exceed their new revised target DOI. In general, excess inventories are not the biggest worry for this very troubled industry.

Electronics distributors also have aggressively cut inventory targets, as they worry that anything on their shelf could grow stale in a prolonged downturn. But electronics distributors have become excellent inventory managers over the past three years, and iSuppli predicts they will meet their new lowered targets.

Semiconductor companies will see their stockpiles rise by at least another US$1.5 billion, but with reduced inventory targets, excess inventories on their shelves will actually increase by almost US$2.2 billion.

Living in excess

Overall, from iSuppli's sampling of 180 electronics companies, representing more than 80% of the revenues of the industry, total inventories are expected to grow from US$94 billion at the end of the third quarter to more than US$104 billion at the end of the fourth quarter. Of the total semiconductor inventories throughout the entire electronics supply chain, US$3.8 billion represented excess at the end of the third quarter. However, iSuppli predicts that US$10.2 billion will be excess at the end of the fourth quarter, for the three reasons listed above.

Another major shift to be aware of is that for most of the period since the dot.com recovery, more than 80%—and often almost 90%—of excess semiconductor inventories have been on the shelves of chip suppliers. This will change dramatically in the fourth quarter, with US$4.23 billion—or 41.5%—of the excess inventory now being held downstream of the semiconductor suppliers. This will result in at least 2% reduced semiconductor growth in 2009 that has not been factored into most people's forecasts.

Putting the US$10.4 billion into perspective, at the beginning of the dot.com bust, iSuppli measured US$13.4 billion in excess inventory, which took two years to work down to manageable levels.

PREVIEW-TSMC Q4 net to fall; UMC, Chartered to post losses

* What: TSMC, UMC, Chartered Semi Q4 results
* When: TSMC (Jan 22), Chartered (Jan 30), UMC (Feb 10)
* Q4 results seen poor, more pain to come in Q1

By Baker Li

TAIPEI, Jan 19 (Reuters) - Top contract chip maker TSMC (2330.TW) probably booked its weakest quarterly profit in nearly six years during the fourth quarter, and smaller rivals UMC (2303.TW) and Chartered (CSMF.SI) could have dived into the red on sluggish demand.

Semiconductor makers across the world are feeling the pinch from a slowing global economy, and analysts say most customers of the three Asian chip foundries were reluctant to place new orders as sales of computers, cellphones and flat-screen TVs stall.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (TSM.N) and United Microelectronics Corp (UMC) (UMC.N) are two big technology exporters in Taiwan, whose economy as a whole suffered a severe slump in December, with exports tumbling a record 42 percent.

"If you want to see clients give big orders to foundries by the end of this quarter, that won't be realistic," said Karen Lin, a fund manager at Taiwan's Paradigm Asset Management Co Ltd.

(See below for table of forecasts)

In the United States, chip giant Intel Corp (INTC.O) issued two revenue warnings in the past three months, while Nvidia Corp (NVDA.O), one of TSMC's major customers, expected its fourth-quarter revenue to decline 40-50 percent sequentially.

Intel held back on giving detailed first-quarter guidance, citing economic uncertainty. [ID:nN15543836]

On Thursday, TSMC is likely to hint its first-quarter sales would fall 30 percent from the previous three months, while UMC's first-quarter sales could fall at a similar pace, according to Primasia Research.

Smaller Singapore-based rival Chartered Semiconductor Manufacturing (CHRT.O) could struggle further with weaker economies of scale. There has been talk Singapore's Temasek Holdings [TEM.UL] may sell its 60 percent stake in Chartered Semi to either TSMC or UMC. The companies all declined to comment.

"With the other foundries also struggling with excess capacity, a strategic investor would be our best guess should Chartered need to consider a meaningful equity issuance," Macquarie analyst Patrick Yau wrote in a recent report.

Calling it a one-man show in the market for made-to-order chips, Goldman Sachs said TSMC could remain profitable in 2009, when UMC, Chartered Semi and China's top foundry SMIC (0981.HK) (SMI.N) are all likely to lose money.

Deutsche Bank put a "buy" call on TSMC as it believes TSMC should be the major beneficiary of inventory restocking in the 2009 second quarter, thanks to its strong execution and dominant market share in advanced technology nodes.

TSMC's Taipei-listed shares fell 26 percent in 2008, while Taiwan's main TAIEX share index lost 45 percent. UMC shares dropped 60 percent.

Q4 PROFIT FORECASTS

Net profit/loss Change (pct) Y/Y Q/Q TSMC T$11,316 mln -67 -63 UMC (T$2,924 mln) -- -- Chartered ($58.46 mln) -- --

NOTE - Both UMC and Chartered booked profits in the fourth quarter of 2007 and saw losses in the third quarter of 2008. (US$1=T$33.5)

Global semiconductor sales tumbled 22% in December from a year earlier, putting 2008's decline at 2.8%, as the recession continues to batter the industry and prompt cutbacks from both chip producers and buyers.

Semiconductor Industry Association President George Scalise said, "The industry is currently facing an unprecedented period of uncertainty. A resumption of sales growth will depend in part on the effectiveness of various measures now under consideration by the federal government" to stimulate the economy.

Consumers drive more than 50% of all semiconductor demand, leaving the sector increasingly linked to the economy, consumer confidence and disposable income, Mr. Scalise noted. While sales of electronic products held up "reasonably well" during the first three quarters, the recession "severely dampened" fourth-quarter sales.

– Wall Street Journal

Taiwan's TSMC January sales plunge 59 pct

TAIPEI, Feb 10 (Reuters) - TSMC <2330.TW>, the world's biggest contract chip maker, said on Tuesday its January sales plunged 59 percent from a year ago, its worst drop since it went public, showing weaker demand for electronics products.

Uncosolidated sales at Taiwan Semiconductor Manufacturing Co Ltd (TSMC) reached T$12.44 billion ($367 million) last month, a company official told reporters. That compared with T$30.286 billion a year ago and December's T$13.161 billion.

TSMC's results came as Taipei's stock market closed on Tuesday. TSMC shares fell 1.43 percent, underperforming the broader TAIEX market's <.TWII> 0.70 percent rise.

tsmc already crumbling....csm got chance meh ?