Taiwan Semiconductor Manufacturing (TSMC) on Thursday reported strong chip shipments during the third quarter, lifting its net income over market forecasts.
The world's largest contract chip maker said chip shipments in the July through September quarter rose by almost 20 percent compared to the second quarter, and it sold more chips made using advanced manufacturing technology.
TSMC's revenue was NT$69.3 billion (US$2.1 billion as of the end of the period being reported), down less than 1 percent from NT$69.7 billion during the third quarter of 2004. Net income fell 12 percent to NT$24.5 billion.
Despite the year-on-year drop in third-quarter net income, TSMC beat stock-market analysts forecasts for net income of NT$22.4 billion, according to Thomson One Analytics.
TSMC reported that the amount of its production lines in use during the third quarter rose to 96 percent, from 85 percent in the second quarter, a sign the chip industry continues to recover from a glut that swatted earnings earlier in the year. The downside for users is that full chip factories for companies like TSMC could allow them to charge more for their manufacturing services and lead to higher prices for technology components.
The company forecasts it will post revenue of between NT$77 billion to NT$79 billion in the final three months of 2005, which would be record-high quarterly revenue for TSMC. The chip maker's previous high was NT$69.7 billion, from the third quarter of last year. The fourth quarter is normally the strongest time of the year for the electronics industry due to holiday gift giving. However, last year an inventory glut caused chip maker revenues to decline in the fourth quarter.
"This year, inventories look like they're under control," said Rick Tsai, president of TSMC.
The chip maker expects its factories to be full during the fourth quarter, at a 100 percent utilization rate.
TSMC executives declined to forecast beyond the fourth quarter of this year, but Tsai said next year overall shouldn't be too different from 2005 for the chip industry. The company also declined to discuss any plans for 2006 spending on new factories or production lines.
The company highlighted its progress in cutting-edge production technologies, and said it expects 130-nanometer and smaller technologies to account for over half of its revenue in the fourth quarter. A nanometer is a measurement of the size of transistors and other parts that are etched onto chips. The more transistors on a chip, and the closer they are together, the faster the chip can perform tasks.
Still, stiff competition with other contract chip makers, like rival United Microelectronics Corp., is keeping prices from rising much, TSMC said.
"In 90-nanometer, as you know, competition is quite fierce, so pricing pressure is high and it will have some price impact on our 90-nanometer," said Tsai.