TSMC and UMC Top Market Expectations With Surging January Sales

Both Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) exceeded market expectations with surging revenue in January, usually a lukewarm month.

TSMC, currently the world's No.1 manufacturer of built-to-order chips, had consolidated revenue for January this year rise 3.5% from December and 8.4% YoY, to three-month high of NT$51.4 billion (US$1.7 billion). UMC, in the meantime, had revenue of NT10.0 billion (US$335.4 million), rising 1.58% from last December and capping the downtrend for five consecutive months.

Industry executives view the surges as the sign that inventory backlog at semiconductor makers has declined to a healthy level, proving that business recovery of the industry is taking hold.

Originally, they expected the two companies' revenue for January to slip from December because of seasonal factor, attributing TSMC's growth mostly to the strong market for low- and mid-end smartphones, which bolstered sales at TSMC's foremost customers, including chip vendors Qualcomm and Broadcom. Also, brisk re-stocking at vendors in preparation for the weeklong Chinese New Year holidays in  China helped drive TSMC's revenue.

For UMC, the growth was mostly attributable to not only strong handset market but also its increased sales of 28nm-process foundry service.

Both companies feel that low-season factor will not impact their sales for the first quarter of this year. TSMC estimates its revenue for the first quarter to decrease 5-7% from the previous quarter, lower than the average of low-season quarters in the past. Gross margin ratio for the first quarter was estimated to be flat or inch up 2% from the fourth quarter of last year. This year, quarterly revenue for the company is projected to begin growing in the second quarter due to inventory replenishment at the company's customers.

UMC executives estimate the company's shipments of silicon wafers for the first quarter to slightly increase from last quarter, but the below-par capacity utilization of the company's 300-mm wafer fabrication factories will drag down its average selling price by around 4% and revenue slightly for the first quarter. (KL)