Higher Capex Suggests Lucrative Earnings at TSMC

Taipei, Nov. 27, 2009 (CENS)--Up till the middle of this month, Taiwan Semiconductor Manufacturing Co. (TSMC) has spent as much as NT$91.9 billion (US$2.8 billion at US$1:NT$32) on new production equipment, surpassing its revised expenditure goal of US$2.7 billion for this entire year.

Industry executives even estimated No.1 silicon foundry supplier to increase such expenditure to NT$100 billion (US$3.1 billion) by the end of this year, a number close to Intel's and Samsung's.

According to TSMC's own figures, whenever the company keeps raising capital expenditure for several consecutive quarters, it usually foresees earnings growth over the next one to two quarters, as is true with the company's annual capital outlays.

The foundry set the spending at only US$1.5 billion early this year. Since the second quarter, it has raised the budget three times to US$2.7 billion in conjunction with recovering market, which is fueling demands for 65nm and 40nm process foundry services.

The latest revised number is 50% higher than its 2008 outlay of US$1.8 billion. Institutional investors estimated the company to spend US$3.5-4 billion on equipment next year, the highest in five years, suggesting the company would post lucrative earnings over the next two to three years. Some institutional investors estimated the company to make NT$5 per share in 2015.

World’s Top-4 Silicon Foundries and Their 2009 Capex Plans

TSMC	UMC	Chartered	SMIC
US$2.7B	US$500M	US$500M	US$190M

Sources: The companies.