Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker, said last week that its first-quarter net profit nearly doubled compared to the same time last year due to stronger than expected sales of chips used in personal computers.
The company, which manufactures chips designed by its customers, reported its net profit rose to NT$32.61 billion (AUD$1.35 billion as of March 31, the end of the period being reported.), from NT$16.82 billion during the same period last year. Revenue rose 39 percent to NT$77.29 billion.
The results beat expectations for a net profit of NT$27.40 billion, based on a survey of analysts polled by Thomson Financial.
Of the three major IT product categories, TSMC said its chip sales for PCs was the only segment that grew as a percentage of overall sales, to 37 percent from 32 percent of sales in the fourth quarter. Sales of communications chips dropped a few percent, as did chips for consumer electronics gear.
Weaker than expected PC sales in the first quarter could bite into TSMC's second quarter, by causing customers to reduce their chip orders. The chip maker said it's sales of chips for PCs could fall by a double-digit percent in the second quarter.
"There are certain inventory concerns out there," said Rick Tsai, TSMC's chief executive officer. "But the situation seems to be under control."
Overall, the company sees brisk demand for chips in the second quarter and expects revenue to rise to between NT$79 billion and NT$81 billion, with gross profit margins that could beat the 47.4 percent registered in the first quarter.
The company has been outsourcing excess orders to partners in Taiwan such as Vanguard International Semiconductor Corp. and Powerchip Semiconductor Corp., and has been "rushing in" new equipment for some of its own production lines, Tsai said.
"Our capacity is tight, but it's manageable," he said.
TSMC predicts the global chip industry to grow by a percentage in the teens this year, and a high single-digit figure next year, Tsai said. The company is considered a bellwether for the global IT industry because of the range of devices it manufactures chips for.
The Semiconductor Industry Association, an industry group based in San Jose, California, has forecast worldwide chip sales will increase 7.9 percent in 2006, to $245 billion. Sales of chips for the communications segment, mainly mobile phones, have been particularly strong this year, the industry group has said.