TSMC sales up versus year ago, seen improving

TAIPEI (Reuters) - Top contract chip maker TSMC (2330.TW) rounded out the quarter with a 21 percent rise in March sales versus a year ago, when the Taiwan firm's clients cleared out excess inventories in a downcycle.

First-quarter sales grew by a third from a year ago but declined from the fourth quarter and fell slightly below market expectations as weakness in the global economy hit sales of chips that go with PCs and other consumer gadgets.

After a bright fourth quarter, analysts say a stronger Taiwan dollar also hurt first-quarter sales and profit margins of TSMC (TSM.N) and rival UMC (2303.TW) (UMC.N), which sell the bulk of their chips to U.S. clients, including Texas Instruments TXN.N.

But the technology industry, including the chip foundry market, is likely to regain momentum from the current quarter, said Kevin Yang, president of Taiwan's Paradigm Asset Management Co Ltd, which overseas T$30 billion in client assets.

"The rising Taiwan dollar was a factor in the first quarter but the impact should be easing gradually and companies are also hedging," Yang said.

"Some inventories of chips and computers have been digested recently, so it is quite possible to see a rebound in the PC and mobile phone markets soon."

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) posted unconsolidated sales of T$26.56 billion ($877 million) last month, 21 percent higher than a year earlier, the Taiwan company said on Thursday, without giving an explanation.

On a consolidated basis, TSMC's total sales reached T$87.48 billion in the first quarter, down 6.8 percent from the fourth quarter of last year, according to Reuters calculations, but they were 35 percent higher than a year ago.

TSMC's first-quarter result was at the lower end of its own forecast of between T$87 billion and T$89 billion for the quarter. Analysts had expected TSMC to book sales of T$87.78 billion for the first quarter, according to Reuters Estimates.

As a group, second-quarter sales of Taiwan's technology firms are expected to grow slightly from the first quarter, Yang said. But TSMC is not in Paradigm's portfolios now.

Ahead of the sales figures, TSMC shares rose 2.2 percent, helping to send Taiwan's main TAIEX share index .TWII up 1.9 percent to a near three-week closing high. UMC shares gained 1.6 percent.

But Texas Instruments, which supplies mobile phone chips, lowered its first-quarter earnings and revenue target last month.

($1=T$30.3)

(Editing by Anne Marie Roantree and Lincoln Feast)