PREVIEW-TSMC, UMC profits set to peak on oversupply risk

* What: TSMC, UMC April-June earnings

* When: TSMC (July 29), UMC (Aug 4)

* TSMC seen posting record quarterly net profit

* StarMine data shows likely upside surprise for TSMC, UMC FY

By Baker Li

TAIPEI, July 27 (Reuters) - TSMC (2330.TW) and UMC (2303.TW), the world's two largest contract chipmakers, could struggle to replicate robust quarterly earnings growth in the second half as a possible supply glut threatens to hurt chip prices.

Asian chip foundries are winning more orders from overseas clients who are selling more powerful chips for new computers, mobile phones and products such as Apple's (AAPL.O) popular iPad.

Taiwan's TSMC (TSM.N) and UMC (UMC.N) are ramping up capital spending to boost capacity, but if Europe's debt problem persists and demand weakens, high stockpiles could emerge in late 2010 or early 2011.

Some analysts say earnings at the two firms are likely to peak in the third quarter, the busiest sales season, before they start to fall in the fourth quarter. Technology demand typically slows after the pre-Christmas buying boom.

"The second quarter should be very good and the third quarter not bad but there should be seasonal weakness after that," BNP Paribas semiconductor analyst Eric Chen said.

"For foundries, however, risks will be high next year," Chen said, referring to possible inventory correction. But he currently rates both TSMC and UMC a buy.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For StarMine comparitive data: r.reuters.com/tur69m

For more Asia earnings previews: [ID:nSGE66J00X]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Taiwan's export order growth is also tapering.

Orders for Taiwan's exports, almost half of which are electronics or communications equipment, rose 22.5 percent in June from a year ago, just above a median forecast of 21.9 percent in a Reuters poll. This was the slowest pace of year-on-year growth in eight months. [ID:nSGE66J0DS]

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is expected to earn a record quarterly net profit of T$35.194 billion ($1.1 billion) in April-June. United Microelectronics Corp (UMC) could have seen its strongest net profit in three quarters.

Intel Corp (INTC.O), Qualcomm Inc (QCOM.O) and Apple Inc (AAPL.O) have reported stellar quarterly results, helping to kick off the technology earnings sector on a strong note. [ID:nN12197658] [ID:nN21138547] [ID:nSGE66K0BZ]

However, investors are more focused on oversupply and weaker chip prices as they look beyond the strong second quarter. (Editing by Anshuman Daga)