UPDATE 2-Taiwan’s TSMC boosts 2010 capex to ride tech boom

* Q4 net more than doubles to T$32.67 bln, in line

* Sees Q1 sales, profit margins flat from Q4

* Sees 2010 capex at record $4.8 bln vs $2.7 bln year ago

* Stock up 0.7 pct before results, lagging big board
(Recasts with details and analyst comments)

By Baker Li

TAIPEI, Jan 28 (BestGrowthStock) – TSMC’s (2330.TW: ) early
investment to move up the technology ladder has paid off with
the world’s top contract chip maker posting its biggest
quarterly profit in two years and giving it further incentive
to keep spending.

New technologies helped boost output of advanced chips with
fatter margins, allowing TSMC (TSM.N: ) to meet growing demand
from clients selling more powerful chips for new computers,
mobile phones and flat-screen TVs.

At stake is a potential supply glut in the second half of
the year, which has driven cautious investors away from shares
of TSMC and its rivals.

“My observation is the industry is healthy now but how
strong it will be in the coming 3-6 months would be a question
mark,” said John Chiu, who manages T$12 billion ($375 million)
of equity assets for Taiwan’s Fuh Hwa Securities Investment
Trust.

“Only big, richer guys can keep pouring money for new
technologies in the long term, and TSMC has been doing that to
maintain its leadership,” said Chiu, who has no TSMC shares in
his portfolios.

Showing its confidence in chip demand, TSMC forecast on
Thursday its capital spending would grow about 80 percent to
record $4.8 billion in 2010. Analysts say a big chunk of that
will go to boost production of advanced chips.

That is much higher than cross-town rival UMC (2303.TW: ) and
China’s SMIC (0981.HK: ), which analysts say could each allocate
about $1 billion and $400 million for spending this year.

TSMC expects first-quarter sales to reach T$89-91 billion
from the fourth quarter’s T$92.1 billion, largely in line with
market expectations.

TSMC said its first-quarter gross profit margin should be
46.5-48.5 percent, compared with the 48.5 percent in the
previous three months. It expects an operating profit margin of
35-37 percent, versus the fourth quarter’s 36.5 percent.

TSMC Chairman and CEO Morris Chang forecast sales in the
global semiconductor market would rise 18 percent this year,
better than a 9 percent rise he forecast previously.

Sales of the global chip foundry market would grow by a
larger 29 percent this year, Chang told an investor conference.

ADVANCED TECHNOLOGY

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) booked a
net profit of T$32.67 billion ($102 million) in
October-December, more than double a year ago and 7 percent
higher than the third quarter.

For a graphic on TSMC’s earnings and sales, click
http://graphics.thomsonreuters.com/0110/TW_TSMCQ40110.gif
http://graphics.thomsonreuters.com/0110/TW_TSMUMC0110.gif

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For Reuters Insider video on analyst poll for TSMC/UMC,
click: http://link.reuters.com/tur85h

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

A spate of bullish news from global technology firms such
as Intel (INTC.O: ) and IBM (IBM.N: ) has also been positive for
chip foundries like TSMC, which supply chips to chip designers
without their own plants and to other big foreign chip makers,
including Texas Instruments (TXN.N: ) and Nvidia (NVDA.O: ).
[ID:nN19218960] [ID:nN13151343]

So far this year, TSMC’s Taipei-listed shares have fallen
about 5 percent after a 46 percent jump last year. The main
TAIEX (.TWII: ) is also down 5 percent this year amid fears that
China’s recent moves to tighten liquidity will affect demand
for chips.

Sales of microchips made by 65-nanometre process
technology, or 65 billionths of a metre, accounted for 30
percent of TSMC’s total sales in the fourth quarter, while 9
percent of its sales were from more advanced 40-nano technology
in the same quarter.

“Yields in the 40- and 45-nano technology continued to
improve at a faster rate in the past three months,” said Chang,
who served as TSMC’s chief executive again in June last year as
he aims to steer the company’s ride on the sector’s recovery.

“We will be the only effective supplier in the next two
years,” he said, referring to the advanced chips.

Still, some analysts say pricing competition could
intensify if other smaller players in China sell more chips at
a relatively lower price to gain new orders from clients.

In the longer term, Globalfoundries is a potential threat
to TSMC and UMC as the company is merging its operations with
recently acquired Chartered Semiconductor in Singapore to
create a single contract chipmaker. [ID:nN12123697]
(US$1=T$32)

Money

(Editing by Jean Yoon)

UPDATE 2-Taiwan’s TSMC boosts 2010 capex to ride tech boom