Communications chips help drive TSMC Q2 sales

Strong sales of chips for communications products and consumer electronics drove revenue at the world's largest contract chipmaker to an all-time high in the second quarter. The company also eased some fears over an inventory correction in the chip industry.

Taiwan Semiconductor Manufacturing Co (TSMC), a bellwether for the IT industry due to the variety of chips it produces, reported its revenue rose 37 per cent year-on-year to NT$82.12 billion ($US2.50 billion as of June 30, the end of the three-month period being reported). The company's net profit jumped to NT$34 billion, from NT$18.97 billion.

TSMC's previous revenue record was NT$81.2 billion, from the fourth quarter of last year.

The results beat expectations for a net profit of NT$32.9 billion, based on a survey of analysts polled by Thomson Financial. The revenue figure came in slightly above the company's guidance.

TSMC forecast its revenue in the current quarter, July 1 to September 30, would be NT$79 billion to NT$82 billion, nearly flat from the second quarter. The figures were better than some analysts had predicted.

Excess inventory in the chip market has caused fears of a downturn for chip developers.

"We believe this correction will be milder and more moderate than in 2004," president of TSMC, Rick Tsai, said during the company's second quarter investors' conference.

Chip developers hadlearned how to better manage inventories in the few years since the last downturn occurred, he said.

But trouble in the chip industry wouldl take a bite out of growth, TSMC said. The company forecast that chip industry revenue growth would probably come out at about 8 per cent this year due to the inventory issue, the low end of an 8 per cent to 10 per cent range it gave earlier this year.

The company also said its spending on new factories and production equipment will probably be about $US2.6 billion this year, the low end of a $US2.6 billion to $US2.8 billion range it previously forecast.