Taiwan's two leading chipmakers, Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., have forecast 60 percent and 73.7 percent falls in net profit this year respectively as demand for semiconductors worldwide contracted.

Both TSMC and UMC reported this week falls of more than 60 percent in net profit in the first quarter to March from the preceding quarter, while revenue also shrank some 26 percent for each in the same period.

The two companies anticipate further contraction of some 30 percent in their second-quarter revenues as compared with the January-March period.

"The overall semiconductor market in the first half of 2001 has seriously declined as compared to its rapid growth in year 2000," said TSMC spokesperson K.C. Chen in a statement.

But TSMC chairman Morris Chang was optimistic about the industry's outlook, saying the company's earnings for the third quarter would be better than the second quarter.

The company's book-to-bill ratio crept above 1.0 in April in what was described by Chang as "the first sparrow of spring."

The figure, indicating TSMC's orders are greater than current shipments, suggests a brightening picture for semiconductor demand later this year, said President Securities analyst Joe Teng.

"The second quarter is the worst it can get and after that everything will get better," said Alfred Wang, research manager for the Industrial Technology Research Institute (ITRI).

"A significant reduction in the oversupply of personal computers early this year is expected to further lift semiconductor demand as early as in September," Wang added.

However, UMC chairman John Hsuan said there was no clear sign at this point of a conspicuous upturn in demand.

"While the correction in the PC sector seems to have drawn to an end, the demand side simply remains too weak to justify an immediate upturn," he said.

"We are not exactly clear on the industry's prospects but it is certain that (the industry) has reached the bottom," he said.

Hsuan declined to predict when the outlook would improve, only saying "we are certain any such recovery will be gradual."

TSMC and UMC are the world's two largest semiconductor foundries, making chips under contract for other semiconductor companies.

Taiwan's semiconductor production is expected to fall 10 percent this year as a result of the global slowdown, said ITRI's Wang.

Taiwan's semiconductor output jumped 67.7 percent to 710 billion Taiwan dollars (US$21.57 billion) last year, accounting for just under five percent of the country's total gross domestic product (GDP).

(China Daily 05/04/2001)