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1999 Second
Quarter Financial Reports |
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Taiwan Semiconductor Manufacturing Company
Ltd. Announces
Second Quarter Results for the Period
Ended
June 30, 1999 |
| Hsin-Chu, Taiwan, R. O. C., July 27th, 1999,
Taiwan Semiconductor Manufacturing Company Ltd. (TAIEX: 2330,
NYSE: TSM), ("TSMC" or "the Company") the
world's largest dedicated semiconductor foundry company, announced
today the results of its operations for the second quarter ended
June 30, 1999. All figures were prepared in accordance with
generally accepted accounting principles in Taiwan. |
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| 2Q99 Results: Year-over-Year Comparison
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Highlights |
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Quarterly unit sales
set a new record high at 422K. |
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Capacity was fully utilized due
to a strong recovery in demand. |
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Net sales increased 48.5% YoY
to NT$17,232 million. |
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Operating income increased 64.1%
YoY to NT$6,193 million. |
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Net income rose 60.3% YoY to
NT$6,022 million. |
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Diluted earnings per share (EPS)
increased 60.3% to NT$0.80 from NT$0.50. |
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Net Sales: |
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Net sales in 2Q99 totaled NT$17,232
million, up 48.5% compared with NT$11,601 million for
the same period of 1998. Net sales mentioned above includes
revenue and revenue adjustment from WaferTech (See Accounting
Change below). The unit shipment of 8" equivalent
wafers grew 52% to 422K units in 2Q99 from 277K in 2Q98.
Unit volume growth resulted from new customers and strong
demand for the foundry service across all regions.
The average selling price (ASP) in the New Taiwan dollar
declined by 5.5% YoY to NT$36.0K in 2Q99, as a net result
of price erosion in 2H98 and improvement in product
mix in 1H99. In US dollar terms, quarterly ASP declined
4.8% to US$1,098 per 8" equivalent wafer. The New
Taiwan dollar appreciated from the weighted average
rate of NT$33.07 to NT$32.81 per US dollar during this
period.
Sales breakdown by application, technology, customer
type, and geography for 2Q99 and 2Q98 are summarized
in Table 1.
| Segment:
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2Q99
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2Q98
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Segment:
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2Q99
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2Q98
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| Application
(Unit) |
Customer Type
(Revenue) |
| Computer |
40% |
34% |
Fabless |
68% |
67% |
| Communication |
25% |
27% |
IDM |
27% |
30% |
| Consumer |
15% |
19% |
System |
5% |
3% |
| Industrial / Others |
7% |
7% |
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| Memory |
13% |
15% |
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| 2001 Technology
(Unit) |
Geography (Revenue)
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| 0.25 £gm
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21% |
0% |
North America |
53% |
53% |
| 0.35 £gm
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30% |
32% |
Asia Pacific |
36% |
26% |
| 0.50 £gm
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39% |
49% |
Europe |
7% |
16% |
| 1.0+ £gm
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10% |
20% |
Japan |
4% |
5% |
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Accounting Change: |
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Starting in 2Q99, TSMC recognizes 100%
of WaferTech's revenue (NT$1,363 million for 2Q99 and
1Q99 retroactive adjustment), instead of counting only
the sales commission from WaferTech, which was the case
until 1Q99. Also starting in 2Q99, an 85% capacity obligation
charge paid to WaferTech was applied to Cost of Sales
instead of Non-operating Expenses, which had been the
case in 1Q99. Net profit and loss impact of WaferTech
will continue to be reflected in the 'Investment Income'
line on TSMC's income statement. There is no net impact
on TSMC's net income and EPS, while gross margins are
lower under the new accounting method. The Company believes
that such revenue and cost recognition is a more realistic
depiction of actual revenue and cost flow for TSMC, and
therefore, is a preferable method of accounting. Income
statements prior to 2Q99 are not restated under the new
accounting method. |
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Gross Margins: |
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The gross margin under the new accounting
method was 43.7% in 2Q99 compared with 42.9% in 2Q98. |
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Operating Expenses: |
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Operating expenses in 2Q99 increased
11.8% from the same period a year ago to NT$1,343 million
due to higher Selling & Marketing and R&D expenses.
Operating expenses as a percent of net sales decreased
to 7.8% in 2Q99 from 10.4% in the same period of 1998
due to higher sales number. |
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Non-Operating Income / Expenses: |
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Net non-operating item had income of
NT$138 million in 2Q99 versus expenses of NT$115 million
in 2Q98. This is mainly a result of reclassification of
WaferTech's 85% capacity obligation charge in both 1Q
and 2Q99. |
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Investment Income / Losses: |
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Investment losses decreased to NT$417
million in 2Q99 compared to NT$777 million in 2Q98, primarily
resulting from improving Vanguard International Semiconductor
Company ("VISC"). VISC resulted in NT$99 million
investment loss vs. NT$442 million investment loss in
2Q98.1 WaferTech resulted in NT$343 million investment
loss vs. NT$334m investment loss in 2Q98.2 |
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Net Income: |
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Net income tax credit for 2Q99 was
NT$108 million (NT$536 million tax expenses and NT$644
million tax credit), down from NT$769 million in 2Q98.
Net income increased 60.3% to NT$6,022 million in 2Q99.
Diluted earnings per share were NT$0.80 for 2Q99, up from
NT$0.50 in the same period of 1998. |
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Operations Highlights: |
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Capacity utilization based on wafer
produced (or "out utilization") increased to
103% in 2Q99 from 75% in 2Q98. Installed capacity was
up 7% to 437K (including WaferTech) in 2Q99 compared to
407K in 2Q98 in terms of 8" equivalent wafers.
In order to accommodate increasing demand, the Company
announced an upward revision in its capital expenditure
for 1999. The current capital expenditure plan stands
at US$1,112 million excluding WaferTech. This plan represents
an increase of 34% compared to the previous plan of
US$830 million. The increase of US$282 million is for
the equipment purchase at fab 6. Capital expenditure
plan for WaferTech in 1999 is currently planned at US$265
million, up from the previously announced US$106 million.
The plan for the Singapore joint venture with Philips
is currently at US$86 million. As a result, total wafer
capacity for 1999 is now scheduled to increase by 14%
YoY to approximately 1.87 million 8" equivalent
wafers compared to the previous plan's 11% increase
to 1.8 million wafers.
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Major announcements during 2Q99
included: |
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The policy for TSMC
ADR conversion sale program |
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Industry's first commercially
available true 0.18-micron process technology |
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Strengthened strategic alliance
with Acer Group through acquisition of Acer Semiconductor
Manufacturing Inc. |
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Foundry industry's first web-based,
browser-accessed supply chain management information
services |
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Appointment of a new head for
European Operation |
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Please visit the Company's website
for the details of the announcements. |
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Year 2000 Compliance: |
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As of April 30, 1999, TSMC has completed
100% of the tasks which TSMC has control over. However,
we still have a few items of equipment for which we are
waiting for Year 2000 solutions from the major semiconductor
equipment manufacturers. Table 2 shows the status of Year
2000 solution deployment by major categories to July 2,
1999. For the area where 100% compliance is not achieved,
we are working closely with the equipment manufacturers
to expedite the Year 2000 solutions. We expect all of
the solutions to be ready by the end of July, 1999.
Table 2: Y2K Compliant Status as of July 2, 1999
| Category |
Percentage Completed |
Manufacturing Equipment
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98.9% |
IT Infrastructure
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100.0% |
Commercial Software
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100.0% |
In-house Application
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100.0% |
| Total |
99.6% |
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| 2Q99 Results: Sequential |
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Highlights |
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Sequential recovery
in order volume continued. |
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Net sales rose 37.9% QoQ. |
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Operating income increased 27.1%
QoQ. |
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Net income increased 47.3% QoQ.
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Diluted earnings per share were
NT$0.80, an increase of 47.3% from NT$0.54 in 1Q99.
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Net Sales: |
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Net sales in 2Q99 totaled NT$17,232
million, up 37.9% compared with 1Q99, as a result of higher
unit sales of 8" equivalent wafers. Unit shipment
of 8" equivalent wafers grew 32% to 422K units in
2Q99 from 320K in 1Q99. (Please see "Accounting Change"
above for details.)
The ASP in the New Taiwan dollar and US dollar remain
fairly stable. In US dollar terms, the quarterly ASP
was almost unchanged at US$1,098 per 8" equivalent
wafer compared to US$1,101 in 1Q99. The New Taiwan dollar
depreciated from the weighted average rate of NT$32.58
to NT$32.81 per US dollar during the period.
Sales breakdown by application, technology, customer
type, and geography for 2Q99 and 1Q99 are summarized
in Table 3.
Table 3: Sales Breakdown
| Segment:
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2Q99
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1Q99
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Segment:
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2Q99
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1Q99
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| Application
(Unit) |
Customer Type
(Revenue) |
| Computer |
40% |
44% |
Fabless |
68% |
72% |
| Communication |
25% |
27% |
IDM |
27% |
25% |
| Consumer |
15% |
18% |
System |
5% |
3% |
| Industrial / Others |
7% |
3% |
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| Memory |
13% |
9% |
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| 2001 Technology
(Unit) |
Geography (Revenue)
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| 0.25 £gm
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21% |
15% |
North America |
53% |
53% |
| 0.35 £gm
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30% |
32% |
Asia Pacific |
36% |
36% |
| 0.50 £gm
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39% |
38% |
Europe |
7% |
8% |
| 1.0+ £gm
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10% |
16% |
Japan |
4% |
3% |
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Gross Margins: |
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The gross margin under the new accounting method was
43.7% in 2Q99 compared with 49.6% in 1Q99, mainly due
to an impact from an accounting change in recognizing
WaferTech's revenue.
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Operating Expenses: |
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Operating expenses in 2Q99 were NT$1,343
million up from NT$1,326 million in 1Q99. Operating expenses
as percent of net sales decreased to 7.8% in 2Q99 from
10.6% in 1Q99. |
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Non-Operating Income/Expenses: |
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Net non-operating item had income of
NT$138 million versus expenses of NT$536 million in 1Q99.
This is mainly as a result of reclassification of WaferTech's
85% capacity obligation charge from Non-operating Expenses
to Cost of Sales. |
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Investment Income/Losses: |
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Investment losses increased to NT$417
million in 2Q99 compared to NT$226 million in 1Q99, primarily
as a result of higher investment losses at VISC (NT$99
million in 2Q99 versus NT$34 million in 1Q99) and WaferTech
(NT$343 million in 2Q99 versus NT$174 million in 1Q99). |
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Net Income: |
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Net income tax credit for 2Q99 was
NT$108 million (NT$536 million of tax expenses and NT$664
million tax credit) compared to NT$23 million net tax
expense for 1Q99. Net income increased 47.3% to NT$6,022
million in 2Q99 from NT$4,090 million in 1Q99 and diluted
earnings per share (EPS) grew to NT$0.80 from NT$0.54
in 1Q99. |
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Operations Highlights |
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During the 2Q99, TSMC experienced a
continuous sequential recovery in order volume. Average
capacity utilization rate based on wafer produced (or
"out utilization") rose to 103% compare with
87% in the 1Q99. |
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Liquidity and Capital Resource |
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During 2Q99, TSMC generated NT$8.3
billion in net cash from operating activities. Depreciation
and amortization were NT$4.2 billion. Net cash used for
investing activities totaled NT$5.1 billion, primarily
in capital expenditure. Net cash used for financing activities
was NT$3.7 billion, mainly as a result of NT$2.8 billion
decrease in long term bank debt, NT$1.1 billion decrease
in guaranteed deposits.
As of June 30, 1999, TSMC had NT$16.8 billion of cash
equivalent on hand. Debt to assets ratio improved slightly
to 30.3% from 32.6%. Management believes that available
bank credit line and cash flows from operating activities
will be sufficient to finance current operation, investment,
and capital expenditures through at least the next six
months. Cash requirements for periods beyond the next
six months depend upon the Company's profitability,
its ability to manage working capital requirements and
its rate of growth.
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| 1H99 Financial Highlights |
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Highlights |
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Net sales rose 8.8%
YoY to NT$29.7 billion from NT$27.3 billion. |
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Operating income increased 5.6%
YoY to NT$11.1 billion from 10.5 billion. |
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Net income declined 5.5% YoY
to NT$10.1 billion from NT$10.7 billion. |
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Accumulated EPS declined 5.5%
YoY to NT$1.34 from NT$1.42. |
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Company Description: |
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Founded in 1987, TSMC is the first
and largest semiconductor foundry company in the world.
The Company is based in Taiwan's "Silicon Valley",
the Hsin-Chu Science-Based Industrial Park, and is dedicated
to manufacturing advanced integrated circuits, and related
services, for fabless design houses and integrated device
manufacturers (IDM). The Company operates two 6"
wafer fabs and three 8" wafer fabs offering a comprehensive
set of IC fabrication processes, including processes to
manufacture CMOS logic, mixed mode, volatile and non-volatile
memory and BiCMOS chips. In mid-1996, TSMC began construction
on the first-ever, pure-play foundry in the US, WaferTech,
in Camas, Washington, - a $1.2 billion joint venture.
Fab 6 and 7 will be located in the new Tainan Science-Based
Industrial Park in Taiwan. In 1998, TSMC has entered a
join venture agreement with Phillips to construct a foundry
operation in Singapore called SSMC. In 1999, TSMC has
acquired 30% of Acer Semiconductor Manufacturing Incorporation
and formed the TSMC-Acer foundry fab.
Corporate Headquarters:
Taiwan Semiconductor Manufacturing Company Ltd.
No. 121, Park Avenue III, Hsin-Chu Science-Based Industrial
Park
Hsin-Chu, Taiwan, R. O. C.
Tel: 886/3/578-0221
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Investor Relations
