* Q2 net record T$40.3 bln vs consensus forecast T$35.2 bln
* Raises 2010 total capex forecast about a fifth to $5.9
* Sees Q3 sales T$109-T$111 bln vs T$105 billion in Q2
* Stock ends flat before results; off 2% ytd vs 16% UMC
(Recasts with capex, analyst comments on glut and details)
By Baker Li
TAIPEI, July 29 Top contract chipmaker TSMC
(2330.TW) sharply raised its 2010 capital spending forecast
after posting a record quarterly profit, likely leading to
oversupply that could hurt chip prices and the firm's
TSMC (TSM.N) and cross-town rival UMC (2303.TW) (UMC.N) are
ramping up production to meet growing demand for electronics
products, with stockpiles likely forming in late 2010 or early
2011 if Europe's debt problem persists and demand weakens.
The two firms' earnings are seen peaking 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.
"Some of their clients might have started adjusting their
inventories because we are seeing some double bookings," said
John Chiu, a fund manager at Taiwan's Fuh Hwa Securities
"The third quarter could be a peak and weakness in the
fourth quarter is inevitable," said Chiu, who has no TSMC and
UMC shares in his portfolios now.
TSMC said on Thursday it is raising total capital
expenditure for this year to $5.9 billion from the previous
estimate of $4.8 billion to boost capacity and widen its
technology gap with smaller rivals, including UMC and China's
TSMC, which counts Texas Instruments TXN.N and Nvidia
(NVDA.O) among major clients, said it expected third-quarter
sales to reach T$109-T$111 billion from the second quarter's
T$105 billion and higher than market expectations of about
TSMC said its third-quarter gross profit margin should be
48-50 percent, compared with the 49.5 percent in the previous
three months. It expects an operating profit margin of 36-38
percent, versus the second quarter's 38.6 percent.
By churning out more chips with more advanced technology to
meet rising demand for new PCs and other high-tech gadgets,
Taiwan Semiconductor Manufacturing Co Ltd (TSMC) earned a net
profit of T$40.3 billion ($1.3 billion) in April-June.
That was higher than T$24.44 billion in the same period a
year ago and compared with a consensus forecast of T$35.2
billion from Thomson Reuters I/B/E/S.
LOWER INVENTORY LEVELS
Sales in the global semiconductor market would rise about
30 percent this year, with sales in the foundry market growing
by a larger 40 percent, TSMC Chairman and CEO Morris Chang
forecast at its quarterly investor conference on Thursday.
Chang said foundry sales growth would be higher next year,
but did not give numbers.
"It is our responsibilty to do our most to meet demand
(from our customers)," Chang said, adding that inventory in the
whole semiconductor supply chain is rising but will still be
below seasonal levels at the end of the third quarter.
Sales of microchips made by 65 nanometre process
technology, or 65 billionths of a metre, accounted for 27
percent of TSMC's total sales in the second quarter, while 16
percent of its sales were from more advanced 40-nano technology
in the quarter.
Intel Corp (INTC.O), Qualcomm Inc (QCOM.O) and Apple Inc
(AAPL.O) have reported stellar quarterly results, helping to
kick off the tech sector's earnings on a strong note.
[ID:nN12197658] [ID:nN21138547] [ID:nSGE66K0BZ]
Investors, however, are focused on oversupply and weaker
chip prices as they look beyond the strong second quarter.
TSMC announced the results after the Taipei stock market
closed on Thursday. The stock ended unchanged on the day while
the main TAIEX .TWII edged up 0.2 percent.
TSMC shares have fallen 2 percent so far this year while
UMC shares are down 16 percent, against a 5 percent rise on the
big board. UMC's quarterly results are scheduled for August 4.
(Editing by Muralikumar Anantharaman)