Semiconductor Industry

[winston]

Taiwan's UMC posts 2nd quarterly loss, sees more pain

TAIPEI, Feb 10 (Reuters) - Taiwan's UMC (2303.TW), the world's No.2 contract chip maker, booked a second straight quarterly net loss that was much larger than expected as sluggish demand for electronic gadgets hit chip sales, and forecast continued weakness in the first quarter.

United Microelectronics Corp (UMC) (UMC.N) said on Tuesday it made a net loss of T$23.5 billion ($694 million) in October-December, reversing a year-ago profit of T$1.36 billion and compared with a loss of T$1.41 billion in the third quarter.

That was far larger than the analyst consensus estimate of a T$3.31 billion loss, according to Reuters Estimates.

Sector leader TSMC (2330.TW) reported weaker profit for the fourth quarter and said it could see its first loss since 1990 in the first quarter. Customers have been reluctant to place new orders as sales of PCs, cellphones and flat-screen TVs stall.

UMC forecast that the tough market conditions would continue into the current quarter, with wafer shipments plummeting 40-42 percent from the fourth quarter, while average selling prices should drop by a milder 3-5 percent over the same period.

[winston]

Misleading title..

TSMC's Chang sees chip sector near bottom -reports

TAIPEI, Feb 24 (Reuters) - The global semiconductor industry is already near the bottom, but any rebound is likely to be slower than its rapid decline, said Morris Chang, a pioneer in Taiwan's chip industry, media reported on Tuesday.

Speaking to reporters after an industry event, Chang, chairman and founder of the world's biggest contract chip maker TSMC <2330.TW>, said the chip sector will lag slightly behind GDP in its recovery, the Chinese-language Economic Daily reported.

As a result, he said, if U.S. GDP returns to 2008 levels around 2011, then the chip industry should return to 2008 levels by around 2012, the newspaper reported.

TSMC was the only one of the world's top four contract chipmakers to report a profit in the fourth quarter, with the other three -- UMC <2303.TW>, Chartered Semiconductor and SMIC <0981.HK> -- all reporting large losses.

But even TSMC said it could post a loss in the current quarter.

Both TSMC and UMC have seen their sales plunge in recent months, with the pair reporting revenue declines of 59 percent and 62 percent, respectively, for the month of January versus a year earlier. [nTP33781] As the industry hits bottom, it could start to post annual revenue growth again in the 4-5 percent range, Chang said, according to another report in the Chinese-language Commercial Times.

In December, a panel of experts said the global chip industry was bracing for a bleak 2009, with one expert predicting that chip prices would fall as much as 20-30 percent because of overcapacity and excess inventory. [ID:nN18403293] TSMC shares were down 2.56 percent in early trade in Taiwan, while UMC was down 2.69 percent, both lagging a 0.89 percent drop for the broader market <.TWII>.

[winston]

BUY OR SELL-Are chip foundries a bargain after sell-off?

* foundry shares at multi-year lows as tech sales slump
* little sign of near-term recovery in demand
* bigger is better - TSMC favoured by most analysts

By Baker Li TAIPEI, Feb 24 (Reuters) - Major chip foundries are sharing the pain of the semiconductor sector's worst ever downturn and, with little sign of near-term recovery in demand for computers, mobile phones and flat-screen TVs, investors have punished foundry shares across the board.

In Taipei, shares of market leader Taiwan Semiconductor Manufacturing Co Ltd (TSMC) <2330.TW> hit their lowest level in more than five years in late 2008 and have been rangebound since then. United Microelectronics Corp (UMC) <2303.TW> hovers at lows not seen since 1994.

Singapore's Chartered Semiconductor Manufacturing struggles near record lows.

TSMC FAVOURED Despite the gloom, some see the downturn as a good buying opportunity, especially for cash-rich chip makers that can afford to invest in more advanced and efficient technology in the downturn.

Their extra resources now could give them an edge in the next upturn over smaller peers struggling just to stay in business.

"Only TSMC will be profitable this year, and it won't be a recovery across the whole foundry market," said Nomura semiconductor analyst Rick Hsu, who rates TSMC a buy.

"On the advanced technology side, there's a gap between TSMC and other smaller players. TSMC has been taking a front seat in driving technology to more advanced notes," Hsu said.

"UMC has been playing catch-up but the problem is how it can get more new orders when TSMC has a wider customer base." Contract chip makers supply chip designers without facilities and other clients that have their own plants but are increasingly outsourcing production to focus on design and marketing.

Unlike memory chips, where one maker's chip is similar to another's, logic chip foundries require higher technology and marketing to meet demands from clients such as Texas Instruments and Nvidia , whose sales depend on quality chips.

Based on a price-to-book ratio of 2.8 this year, Nomura put TSMC's target share price at T$53, implying 20 percent upside from Tuesday's close of T$44.00.

In the past month, eight of 13 analysts have rated TSMC shares "buy" or "outperform", while only two gave the stock a "sell" or "underperform" rating, according to Reuters data.

TSMC had cash and marketable securities totalling T$211.5 billion ($6.1 billion) at the end of 2008.

"TSMC still has a lot of cash on its hands so it has the ability to move up the tech ladder in the future. We already jumped to buy when the stock dipped to T$38 late last year," said Michael On, managing director of Beyond Asset Management.

"The big will become bigger, so it should be tough for those second-tier companies and maybe they will be gone some day." TSMC Chairman and founder Morris Chang said this week the sector could be near bottom, though he added the recovery could be slow. [ID:nnTP224728] L-SHAPED RECOVERY Some say a long winter for the sector is just beginning after three of the industry's top four players recently reported big fourth-quarter losses and TSMC predicted it would post its first loss since 1990 in the current quarter.

"Customers had been adjusting inventories since late last year and it will be just an L-shape recovery, said Eddie Chen, vice president at National Investment Trust.

"We don't expect any strong recovery by the end of the second quarter, so it is not the right time to buy now since global financial risks still exist." Deutsche Bank has downgraded its rating on Chartered to "sell" from "buy" on fears that tier-two foundries would more rapidly lose market share to TSMC.

Globally TSMC had a 65 percent share of the foundry market in 2008, and its market share would rise to 69 percent in 2010, while UMC, Chartered Semi and China's SMIC <0981.HK> would take the remaining 31 percent together, according to Deutsche Bank.

Karen Lin, a fund manager at Paradigm Asset Management Co Ltd, said sentiment has improved somewhat recently due to some rush orders.

"But there's no rush to increase your holdings," she said.

"You'd better wait until after April and see if demand really picks up. There are still some uncertainties." "If you really want to buy foundry stocks during this downturn but don't want to worry too much in the longer term, your choice will be the most competitive company, that is TSMC," she said.

[financecaptain]

Not good. Major restructuring of the industry is expected over the net 1-2 years.

Semiconductor industry will not recover until 2012, says TSMC chairman
Claire Sung, Taipei; Jessie Shen, DIGITIMES [Tuesday 24 February 2009]

The global semiconductor industry will likely experience negative growth in 2009, but will start to rebound at an annual growth rate of 4-5% from next year, according to Morris Chang, chairman of Taiwan Semiconductor Manufacturing Company (TSMC). The industry-wide downturn will decelerate the sector's growth until 2012 when total revenues will resume to meet 2008 levels.

TSMC CEO Rick Tsai earlier estimated that the global semiconductor market will decline 30% this year.
The current economic slowdown will follow the more painful L-shaped curve, said Chang, noting that US house prices are a crucial indicator for a complete economic recovery worldwide. Stability in the housing market implies that consumer confidence has improved. Consumer confidence has become the key for semiconductor industry's revival, Chang added. The evolving world has positioned semiconductor items as commodities and customers now possess strong market power, according to Chang.

Chang made the remarks at an industry conference yesterday (Feb 23)

Semiconductor sales to drop 20% in 2009, In-Stat says
Press release, February 24; Meiling Chen, DIGITIMES [Tuesday 24 February 2009]

The global recession will wreak havoc on semiconductor sales this year, according to the research firm In-Stat. Worldwide semiconductor revenues will decline by nearly 20% in 2009 to US$199.2 billion, and the industry will not recover to 2007 levels until at least 2012.

Declining confidence resulting from recent shocks and increased uncertainty about the future will lead to more conservative spending even after liquidity improves and the economic recovery is well underway, noted In-Stat analyst Jim McGregor. Restoring consumer and business confidence and overcoming excess capacity will be key to recovery and subsequent growth.

In-Stat reveals that digital signal processor (DSP) revenues declined by 14.9% in 2008 to US$6.6 billion, the lowest level since 2003, and semiconductor fab capacity utilization peaked at 90% early in 2008 while it dropped to 87% in the third quarter.

Although recovery is expected to start in the second half of 2009, revenue growth in 2010 will be modest, at 11.8%. The downturn is expected to be deep enough, and long enough, for semiconductor capacity to ultimately fall, as a result of mergers, acquisitions, bailouts, restructuring, and other industry realignments, said In-Stat.

[financecaptain]

Semiconductor will see some light in 2010. But normal profitability can only return in 2012.

Worldwide semiconductor revenues on pace to decline 24% in 2009, says Gartner Press release
February 25; Michael McManus, DIGITIMES [Wednesday 25 February 2009]

The impact of the financial crisis will result in the semiconductor industry experiencing near record revenue declines in 2009, according to Gartner. Worldwide semiconductor revenues are forecast to reach US$194.5 billion in 2009, a 24.1% decline from 2008 revenues.

Market conditions have worsened since Gartner's previous semiconductor outlook in mid-December of 2008. At that time, Gartner had forecast 2009 revenues to decline 16%.

The industry is expected to return to positive growth in 2010, growing 7.5%, followed by additional growth through 2012. Even with three years of increased revenues, the semiconductor industry will fail to return to 2008 revenue totals. In 2012, the worldwide semiconductor revenue is projected to reach US$253.4 billion, still below 2008 revenue of US$256.4 billion.

"We believe that the financial crisis has reset the semiconductor market," said Bryan Lewis, research vice president at Gartner. "After the 2001 recession, in which semiconductor sales plummeted by a record 32.5%, semiconductor sales took about four years to get back to 2000 levels."

"The rebound after this recession will be similar to that in 2001 because there will be three years of modest growth after the worst year. However, we see a difference in year four, where we expect another overcapacity situation for the industry, especially in DRAM, because of significant manufacturing investments made in the second and third years of the recovery," Mr. Lewis said.

Memory, specifically DRAM, is still a wild card in the semiconductor forecasts for 2009. DRAM suppliers lost more than US$13 billion in 2007 and 2008. Some DRAM companies are starting to go bankrupt and other leading suppliers are substantially reducing supply. This reduced supply should lead to significant price increases in the second half of 2009.

Worldwide semiconductor revenues are expected to fall by at least 17% sequentially in the first quarter of 2009. There is a strong possibility that the first quarter of 2009 could be worse, and if the market continues with moderate declines in the second and third quarters of 2009, the industry could face a record annual decline. Gartner analysts warned that Gartner's negative scenario could reach a 33% decline in 2009.

"Semiconductor suppliers should prepare for Gartner's negative scenario of a 33 percent decline in 2009 revenues," Mr. Lewis said. "Tight control of expenses is essential, but suppliers should reconsider dropping their overall research and development (R&D) budgets because focused R&D investments in the recession will help determine the winners in the upturn. Outsourcing and partnerships can help companies get the most from their R&D budgets."

Gartner has removed solar revenue from its semiconductor forecast because solar cells are not traditional semiconductor devices (solar cells focus on energy generation and are not components in an electronic system), and their high growth rates were distorting the true growth of the semiconductor industry.

[winston]

SAN FRANCISCO - Intel Corp is seeing some predictability return to the chip business this quarter but it is still unclear when the downturn will hit bottom, chief executive Paul Otellini said on Wednesday.

[Poles]

if you visit some semicon maker....just check out their loading bay....now is quiet like library.
i always use loading bay as a performance indicator.

[winston]

Semiconductor capex to sink 45 pct in '09-Gartner

HELSINKI, March 10 (Reuters) - Capital equipment spending in the semiconductor industry will plunge 45 percent this year due to the economic slowdown, with a slow recovery expected for 2010, research group Gartner said on Tuesday.

The group forecast global spending of $16.9 billion in 2009, a 45.2-percent drop from a year ago. It said the most likely scenario for next year was for investments to grow to $20.3 billion.

"The overspending on memory in the past three years, combined with a retrenching consumer market, presents little potential for upside until 2010," Gartner said in a statement.

[winston]

UPDATE 1-TSMC sees semiconductor outlook improving

* Semiconductor outlook better than month ago
* Global semiconductor sales will still fall significantly (Adds details, quotes)

TAIPEI, March 27 (Reuters) - TSMC <2330.TW> , the world's biggest contract chip maker, said on Friday the outlook for the global semiconductor industry was better than it was a month ago.

Earlier this year, TSMC told an investor conference that it saw global semiconductor sales falling by 30 percent this year from last year, as global electronics demand reels from a sharp downturn.

"Things are looking slightly better than what it was a month ago," TSMC Chairman Morris Chang told reporters on the sidelines of a Taiwan-EU business summit organised by the European Chamber of Commerce. "However, compared to last year, (sales) will still fall by quite a lot." Earlier this month, Taiwan Semiconductor Manufacturing Co Ltd raised its first quarter sales and margin forecasts due to rush orders from China, indicating a trend of falling sales that began six months ago had hit bottom.

Some of Taiwan's tech companies have been enjoying rush orders from China as electronics firms restock inventory after large cutbacks in production previously.

In February, local media reported that Chang said the global semiconductor industry was already near the bottom, but any rebound was likely to be slower than its rapid decline.

[winston]

DJ MARKET TALK: MS Raises TSMC, UMC Targets On 2Q Order Outlook

1204 [Dow Jones] STOCK CALL: Morgan Stanley raises TSMC (2330.TW) target price to NT$44 from NT$39, ups rival UMC (2303.TW) target to NT$8.6 from NT$7.7 as orders likely to recover in 2Q.

Expects TSMC's 2Q revenue grow by over 50% on-quarter, UMC's by over 70% on-quarter. Says as overall utilization rates not near 100%, customers eager to place "rush orders" into the foundries.

But "This is leading to inventory build ahead of the third quarter, and we estimate that semiconductor inventories could be up to 90 days after the end of the second quarter." TSMC down 1.7% at NT$51.50, UMC +0.9% at NT$10.90.