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| Taiwan Semiconductor Manufacturing Co.
(TSM): Solid Growth Ahead? |
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Ed Wijaranakula, Ph.D.
Director of Market Analysis, Infotix
Systems, Inc. - April 14, 1999
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All of the data for February 1999 semiconductor sales is in
and the results do not look impressive for Taiwan Semiconductor foundry. Since February
1998, Taiwan Semiconductor's
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sales, compared to that of Asia-Pacific sales, slipped from
7.06 to 4.41 percent despite the fact that Asia-Pacific's market share of worldwide
semiconductor sales made a solid gain from 22 to 23.5 percent or $US 236 million in the
same time period. For the first quarter of 1999, Taiwan Semiconductor reported
net sales of $US 378.82 million, compared to $US 476.85 million for the same quarter last
year. This result represents a year-to-year decline of 20.6 percent. Using the average net
profit margin of 46.4 percent in the first quarter for the past four years, we estimate
the net income for the
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| first quarter of 1999 to be $US
175.73 million or $US 0.15 per
share. The estimated EPS for the first quarter is 16.6 percent below that of the first
quarter of 1998 which was $US 210.52 million or $US 0.20 per share.
Our analysis strongly disagrees with the recent
comment by Mr. George Hou in a Bloomberg interview, which suggests that Taiwan
Semiconductor's earnings growth will accelerate.
Mr. Hou, who manages a $US 82 million Taiwan Growth Fund at Jardine Fleming Investment
Trust Co., has 12 percent of his portfolio invested in Taiwan Semiconductor. From the mean 1999 EPS estimation of
$US 0.46 and a
1998 net profit margin of 30.5 percent, we expect Taiwan Semiconductor to post 1999 net
sales of $US 1.783 billion or a 17.1 percent year-to-year increase. |
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Can Taiwan Semiconductor meet
our expectations? Based upon the recent forecast by Electronic Business, Asia-Pacific
semiconductor sales will reach a total of $US 25.95 billion for the remaining three
quarters. With a 4.41 percent share for Taiwan Semiconductor of the total Asia-Pacific
semiconductor market, we forecast Taiwan Semiconductor's net sales to be $US 1.523 billion
for fiscal year 1999, which is 14.58 percent below expectations.
Our analysis indicates that Taiwan Semiconductor's net sales for fiscal year
1999 could remain flat or only slightly increase over 1998 sales, which were $US 1.52
billion. Without clear visibility regarding the outlook of the chip business due to Y2K
issues, a possible slowdown in PC sales, and increasing research and development costs,
net sales and profit margins could be significantly affected.
(Currency Conversion: 1 $US = 33 $NT)
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About the Author: Dr. Ed Wijaranakula is presently the Director of Market
Analysis at Infotix Systems, Inc. Prior to Infotix Systems, he has worked with
Intel, Hewlett-Packard, Micron, Motorola and Texas Instruments and has held senior as well
as managerial positions in semiconductor manufacturing companies. He has published over 80
technical papers and holds more than 12 U.S. and foreign patents.
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