TSMC to Outsource More Foundry Capacity in 2006

Taipei, Jan. 27, 2006 (CENS)--To lower production costs and focus on the development of advanced process technologies, Taiwan Semiconductor Manufacturing Co. (TSMC) will pass more contracts for its 0.15-micron and 0.18-micron process silicon-foundry services to other suppliers.

Taiwanese industry watchers predicted that Vanguard International Semiconductor Co. (VISC), TSMC' s affiliate, and enterprises that have ties to TSMC, including PowerChip Semiconductor Corp. (PSC), would be the primary beneficiaries of TSMC' s diverted orders.

Rick Tsai, TSMC' s Chief Executive Officer, pointed out that his company would evaluate any 200-mm wafer fab that is efficient and promises good returns on investments for its outsourcing contracts. He added that TSMC' s outsourcing relationships would not necessarily be established on a long-term basis.

TSMC estimated its contract capacity at 600, 000 200-mm wafers this year, with 400, 000 wafers likely contributed by VISC and 200, 000 by PSC. TSMC plans to increase its in-house 200-mm capacity to 6.9 million wafers throughout this year, up 16% from 2005.

Tsai pointed out that his company would spend 95% of its projected US$2.6-2.8 billion in capital expenditures for this year on advanced process technologies and expansions at its 300-mm wafer fabs to concentrate on more high-end orders based on the 90-nm, 80-nm, and 65-nm processes. He noted that orders for his company' s 90-nm process service had already accounted for 17% of TSMC' s revenue by the end of last year. Tsai was certain that his company would promise a return of equity (ROE) of at least 20% throughout this year, despite facing price pressure for its 90-nm products.

The TSMC top executive noted that his company would make the most of its 0.25-micron process capacity at its mainland Chinese factory now, before Taiwan' s government permits Taiwanese chipmakers to invest in 0.18-micron process facilities in mainland China in the future.

TSMC estimated its revenue would dip 6% to 10% to NT$73-76 billion (US$2.28-2.3 billion at US$1:NT$32) this quarter alone from a quarter earlier. In the fourth quarter last year, the company reported revenue of NT$81.1 billion (US$2.5 billion), up 17% from the previous quarter, and net income of NT$33.9 billion (US$1 billion), surging 38% from a quarter earlier.

Tsai pointed out that his company had upwardly revised its forecast for the growth rate of world' s chip industry for this year to 10% to 13% from 8%. He expected consumption of communications chips to slump this quarter, while consumer-electronics chips and computer chips this quarter should stay on par with last quarter.