PREVIEW-TSMC, UMC profits set to peak on oversupply risk

* What: TSMC, UMC April-June earnings

* When: TSMC (July 29), UMC (Aug 4)

* TSMC seen posting record quarterly net profit

* StarMine data shows likely upside surprise for TSMC, UMC
FY

By Baker Li

TAIPEI, July 27 (BestGrowthStock) – TSMC (2330.TW: ) and UMC
(2303.TW: ), the world’s two largest contract chipmakers, could
struggle to replicate robust quarterly earnings growth in the
second half as a possible supply glut threatens to hurt chip
prices.

Asian chip foundries are winning more orders from overseas
clients who are selling more powerful chips for new computers,
mobile phones and products such as Apple’s (AAPL.O: ) popular
iPad.

Taiwan’s TSMC (TSM.N: ) and UMC (UMC.N: ) are ramping up
capital spending to boost capacity, but if Europe’s debt
problem persists and demand weakens, high stockpiles could
emerge in late 2010 or early 2011.

Some analysts say earnings at the two firms are likely to
peak in the third quarter, the busiest sales season, before
they start to fall in the fourth quarter. Technology demand
typically slows after the pre-Christmas buying boom.

“The second quarter should be very good and the third
quarter not bad but there should be seasonal weakness after
that,” BNP Paribas semiconductor analyst Eric Chen said.

“For foundries, however, risks will be high next year,”
Chen said, referring to possible inventory correction. But he
currently rates both TSMC and UMC a buy.

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For StarMine comparitive data: http://r.reuters.com/tur69m

For more Asia earnings previews: [ID:nSGE66J00X]

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Taiwan’s export order growth is also tapering.

Orders for Taiwan’s exports, almost half of which are
electronics or communications equipment, rose 22.5 percent in
June from a year ago, just above a median forecast of 21.9
percent in a Reuters poll. This was the slowest pace of
year-on-year growth in eight months. [ID:nSGE66J0DS]

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is
expected to earn a record quarterly net profit of T$35.194
billion ($1.1 billion) in April-June. United Microelectronics
Corp (UMC) could have seen its strongest net profit in three
quarters.

Intel Corp (INTC.O: ), Qualcomm Inc (QCOM.O: ) and Apple Inc (Read more about Apple stock future.)
(AAPL.O: ) have reported stellar quarterly results, helping to
kick off the technology earnings sector on a strong note.
[ID:nN12197658] [ID:nN21138547] [ID:nSGE66K0BZ]

However, investors are more focused on oversupply and
weaker chip prices as they look beyond the strong second
quarter.

Stock Market Advice

(Editing by Anshuman Daga)

PREVIEW-TSMC, UMC profits set to peak on oversupply risk