UPDATE 1-TSMC February sales rise on year but Q1 seen slow

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By Baker Li

TAIPEI, March 10 (Reuters) - TSMC (2330.TW), the world's top contract chip maker, posted a 38 percent rise in February sales from a year earlier but the result was down from January, reflecting weaker sales of PCs and consumer gadgets. Taiwan Semiconductor Manufacturing Co Ltd's (TSMC) (TSM.N) sales were T$28.38 billion ($924 million) last month, compared with T$20.577 billion a year ago, when its clients cleared out excess inventories, the company said on Monday.

TSMC's February sales were in line with expectations but were 6 percent lower than January's T$30.286 billion. February sales at TSMC and rival UMC (2303.TW) together fell 7.4 percent from the previous month, according to Reuters calculations.

TSMC has forecast first-quarter sales at T$87 billion to T$89 billion, down from T$93.86 billion in the final 2007 quarter, with the first-quarter gross profit margin seen at 42 to 44 percent, easing from 47.8 percent in the fourth quarter.

"There are no doubts that demand from the U.S. has started slowing down and we are closely watching if things will be getting worse or not," said Alex Huang, vice president at Taiwan's Mega International Securities.

But TSMC has larger economies of scale and a wider customer base than smaller rival United Microelectronics Corp (UMC) (UMC.N), whose February sales were almost flat from a year ago. (Click [ID:nTP33781] for a table of both firms' sales)

TSMC and UMC together control around two-thirds of the global market for made-to-order chips and sell most of their products to clients in the United States, including Texas Instruments Inc (TXN.N).

Despite the weaker outlook for the first quarter, TSMC has said sales growth for the company and the foundry sector in 2008 would exceed the 5 percent growth foreseen for the overall semiconductor market.

Major foundries are benefiting from increased outsourcing of manufacturing by chip makers in Europe, the United States and Japan. (Click [ID:nTP146463] for analysis) TSMC announced the results as the Taiwan stock market closed on Monday. TSMC shares fell 4.37 percent to T$61.20 and UMC shares dropped 1.94 percent to T$17.65, while the main TAIEX index slid 2.72 percent. (US$1=T$30.7) (Reporting by Baker Li; Editing by Edmund Klamann)