Taiwan Semiconductor Manufacturing Co. Ltd. said its first-quarter sales declined though net income soared 70%, buoyed by tax credits and a smaller loss on investments.
TSMC is expecting sales to improve in the June quarter as demand picks up and customers build up inventories in the wake of SARS, according to company chairman Morris Chang.
TSMC, the world's No.1 pure-play foundry service provider, reported sales fell 4% from the December quarter, to $1.12 billion but net profits soared 70% to $124.6 million during the same period.
Chang said that he sees second quarter wafer shipments rising more than 20% from the prior quarter while average selling prices (ASPs) will climb 4%.
"The second quarter looks pretty strong," Chang told analysts in a meeting in Taipei Tuesday. "Demand will increase across applications: PCs, consumers and communications."
TSMC's major customers include Altera, ATI Technologies, Motorola, Nvidia, Texas Instruments and Via Technologies, according to analysts.
Chang's comments suggested that demand is improving from integrated device manufacturers and fabless design houses.
He also pointed out that the current outbreak in Asia of the mysterious flu virus, SARS, hasn't had any impact on TSMC's operations or orders.
"Our customers are loading inventories. Short-term indicators from them are pointing to very encouraging directions," the TSMC chairman said.
TSMC's capital spending budget for 2003 will remain at $1 billion to $1.5 billion as forecast earlier this year, Chang said.
United Microelectronics Corp., the biggest rival of TSMC, is expected by some analysts to also give better guidance for the second quarter.
Hsinchu-based UMC will hold a conference call with analysts and the press Wednesday in Taiwan.
High-end output increasing
Some analysts agreed with Chang's second quarter revenue estimate.
"The fact that the second quarter is a typical hot season for consumer products makes it necessary for TSMC's customers to build up inventories," said Rick Hsu, a senior analyst at Nomura Securities Co., Taipei. "As for wireless handsets, inventories are quite low at major handset OEMs, except those on mainland China."
The increasing output of advanced process technologies is another factor that Hsinchu, Taiwan-based TSMC said would help boost its performance.
Chang said he expects capacity utilization for 0.18 micron process and below will exceed 85% in the second quarter, compared with more than 80% for overall process technologies.
Some 85% to 90% of capacity for the high-end 0.13 micron technology is being used, and TSMC is moving smoothly to 90 nm technology.
"Our strategy is to have the 0.13 micron capacity operated at as close to 100% as possible," Chang said. "I'm pleased with our progress in 90 nm technology, of which several versions are set for trial production in the third quarter."
In the March quarter, 0.13-micron process accounted for 11% of TSMC's total sales, jumping 8% sequentially, said Harvey Chang, the company's chief financial officer.
The foundry is intensifying its efforts on 0.13 micron and 0.09 micron technologies, in part because IBM Corp. has entered the race and won Nvidia as a customer, some analysts said.