TSMC Profit Beats Estimates on Tablet, Smartphone Demand
April 28, 2011, 3:58 AM EDTBy Tim Culpan
(Updates with analyst’s comment in fourth paragraph.)
April 28 (Bloomberg) -- Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of chips, posted first-quarter profit that beat analysts’ estimates after demand for smartphones and tablets drove sales of pricier chips.
Net income climbed 8 percent from a year earlier to NT$36.3 billion ($1.3 billion), the Hsinchu, Taiwan-based company said in a statement today. The average of 10 analysts’ estimates in the past 28 days compiled by Bloomberg was for profit of NT$35.3 billion.
TSMC, whose clients include Qualcomm Inc. and Nvidia Corp., widened its profit margins as smartphones and tablets boosted demand for more-advanced chips. The March 11 Japan earthquake “probably has some impact” on second-quarter demand, and may “snap back” after the situation improves, Chairman Morris Chang said today.
“Smartphone demand is generally good, and TSMC’s strong pricing indicates they’re getting a good portion of that,” said Randy Abrams, who rates the stock “outperform” at Credit Suisse Group AG in Taipei.
The shares gained 1 percent to NT$73 in Taipei trading, before the earnings announcement. They’ve have gained 2.8 percent this year.
Revenue this quarter will be NT$109 billion to NT$111 billion, the company said today. That’s ahead of the NT$106.1 billion average of 10 analysts’ estimates compiled by Bloomberg in the past 28 days. Eight of the analysts lowered their second- quarter sales estimates in the past month, according to Bloomberg data.
Global Economy
First-quarter sales climbed 14 percent to NT$105.4 billion, the company said April 8, missing the NT$106.7 billion average estimate of 20 analysts.
The global economic outlook is “softer” than it was three or four months ago, following the Japan earthquake, Chang said. The earthquake won’t hurt supply of materials, he said.
Sales of communications chips will decline this quarter from the preceding three-month period, unlike the typical “single digit” percentage growth, because of the Japan earthquake, Chief Financial Officer Lora Ho said at an investors’ conference today.
“We believe this is a short-term phenomenon, and will last no more than two quarters,” she said. There may be a rebound to satisfy pent-up demand after the situation improves, she said.
Consumer electronics chip sales will increase less than normal because customers currently hold excess inventory, she said.
Qualcomm, Broadcom
Chang on April 6 lowered his forecast for global chip- industry sales, excluding memory products, to 4 percent growth this year from an earlier 7 percent estimate because of the Japan quake’s impact on the global economy.
Qualcomm, the biggest maker of mobile-phone chips, on April 21 announced quarterly sales of $3.88 billion, above the average analyst estimate for $3.62 billion. Broadcom Corp., which designs chips used in TV set-top boxes, on April 26 forecast second-quarter revenue of up to $1.85 billion, missing estimates for $1.89 billion.
TSMC reiterated its $7.8 billion forecast for spending on factories and equipment. Increased outsourcing from customers continues to justify the higher spending as consumers buy more portable devices such as tablets and smartphones, Chang said.
“Every time someone buys a tablet, TSMC gets six or seven dollars,” Chang said today.
--With assistance from Janet Ong in Taipei. Editors: Anand Krishnamoorthy, Young-Sam Cho.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.
