TSMC Reports Third Quarter EPS of NT$1.26

HSIN-CHU, Taiwan, Oct. 26 /Xinhua-PRNewswire-FirstCall/ -- TSMC today announced consolidated revenue of NT$82.48 billion, net income of NT$32.49 billion, and diluted earnings per share of NT$1.26 (US$0.19 per ADS unit) for the third quarter ended September 30, 2006.

Year-over-year, third quarter revenue increased 17% while net income and diluted EPS increased 32.7% and 32.5%, respectively. On a sequential basis, third quarter results represent a 0.4% increase in revenue, and a decrease of 4.4% both in net income and in diluted EPS. All figures were prepared in accordance with R.O.C. GAAP on a consolidated basis.

Although third quarter business was affected by inventory correction, better than expected demand in computer related applications led to third quarter revenue surpassing the guidance slightly. Advanced process technologies (0.13-micron and below) accounted for 49% of wafer revenues while revenues from 90-nanometer process technology alone was 24% of the total wafer sales. Both gross and operating margins reached the high end of guidance with gross margin being 49.9% and operating margin 40.8%. Net margin decreased 2 percentage points to 39.4% from the previous quarter.

"The current inventory correction which started in the third quarter is expected to continue during the fourth quarter," said Lora Ho, VP and Chief Financial Officer of TSMC. "We expect the overall demand in all three major segments to decline sequentially," said Ho. "Based on our current business outlook, management's expectations for fourth quarter 2006 performance are as follows":

    -- Revenue to be between NT$74 billion and NT$76 billion;
    -- Gross profit margin to be between 45% and 47%;
    -- Operating profit margin to be between 35% and 37%.

    Conference Call & Webcast Notice:

TSMC's quarterly review conference call will be held at 8 a.m. Eastern Time (8 p.m. Taiwan Time) on Thursday, October 26, 2006. The conference call will also be webcast live on the Internet. Investors wishing to access the live webcast should visit TSMC's web site at http://www.tsmc.com at least 15 minutes prior to the broadcast. Instructions will be provided on the web site to facilitate the download and installation of necessary audio applications. Investors without Internet access may listen to the conference call, in listen-only mode, by dialing 1-617-213-8054 in the U.S., 852-3002-1672 in Hong Kong, 65-6823-2164 in Singapore, and 44-207-365-8426 in the U.K. (Password: TSMC). An archived version of the webcast will be available on TSMC's web site for six months following the Company's quarterly review conference call and webcast.


TSMC (NYSE: TSM) is the world's largest dedicated semiconductor foundry, providing the industry's leading manufacturing capacity, process technology, library and IP options, and other leading-edge foundry services. TSMC currently operates two twelve-inch wafer fabs, five eight-inch wafer fabs and one six-inch fab. The Company also has substantial capacity commitments at two wholly owned subsidiaries, WaferTech in the U.S. and TSMC (Shanghai) Company, Ltd. in China, and at a joint-venture fab, SSMC, in Singapore. TSMC is the first foundry to run 65-nanometer customer design prototype wafers. TSMC's corporate headquarters are in Hsin-Chu, Taiwan. More information about TSMC is available through the World Wide Web at http://www.tsmc.com .

    Topics in This Report

     -- Revenue Analysis
     -- Capacity
     -- Profit & Expense Analysis
     -- Financial Condition Review
     -- Cash Flow & CapEx
     -- Recap of Recent Important Events & Announcements

    Operating Results Review:


    (Amounts are on consolidated basis and are in NT$ billion except noted
                                          3Q06   2Q06   3Q05     QoQ     YoY

    EPS (NT$ per com. shr.)               1.26   1.32    0.95   (4.4%)  32.5%
        (US$ per ADR unit)                0.19   0.20    0.15

    Consolidated Net Sales               82.48   82.12   70.50   0.4%   17.0%
    Gross Profit                         41.13   42.50   30.96  (3.2%)  32.9%
    Gross Margin                          49.9%   51.8%   43.9%
    Operating Expense                    (7.50)  (7.18)  (6.78)  4.5%   10.6%
    Non-Operating Items                   1.03    0.95    0.29   8.7%  254.9%
    Consolidated Net Income              32.49   34.00   24.49  (4.4%)  32.7%
    Net Profit Margin                     39.4%   41.4%   34.7%

    Wafer Shipment (kpcs 8 inch-equiv.)  1,890   1,869   1,527   1.2%   23.8%


The third quarter consolidated EPS of NT$1.26 represents a 32.5% increase over the same period last year and a 4.4% sequential decline. The consolidated operating results of 3Q06 are summarized below:

Third quarter net sales increased by 17% year-over-year to reach NT$82.48 billion compared to NT$70.5 billion reported in 3Q05. On a sequential basis, net sales increased by 0.4% compared to NT$82.12 billion in the previous quarter. Third quarter net sales slightly surpassed our guidance due to better than expected demand in computer related applications.

Gross profit for 3Q06 was NT$41.13 billion, representing a year-over-year increase of 32.9% and a sequential decline of 3.2%. Gross margin was 49.9% in the third quarter, down from 51.8% in the previous quarter.

Operating expenses were NT$7.5 billion or 9.1% of the net sales. The combined result from non-operating income and long-term investments was a gain of NT$1.03 billion.

Consolidated net income attributable to shareholders of the parent company was NT$32.49 billion, up 32.7% over the same period last year and down 4.4% sequentially. Net profit margin was 39.4%.

    I.  Consolidated Revenue Analysis

    I.  Wafer Sales Analysis

    By Application           3Q06        2Q06        3Q05
    Computer                  28%         30%         30%
    Communication             45%         44%         41%
    Consumer                  20%         20%         23%
    Industrial/Others          5%              5%                    5%
        Memory                                          2%                    1%                    1%

        By  Technology                        3Q06                2Q06                3Q05
        N90-                                            24%                  24%                  10%
        0.11/0.13um                              25%                  25%                  33%
        0.15/0.18um                              33%                  32%                  35%
        0.25/0.35um                              13%                  14%                  16%
        0.50um+                                        5%                    5%                    6%

        By  Customer  Type                  3Q06                2Q06                3Q05
        Fabless/System                        71%                  72%                  71%
        IDM                                              29%                  28%                  29%

        By  Geography                          3Q06                2Q06                3Q05
        North  America                          78%                  77%                  75%
        Asia  Pacific                            10%                  10%                  11%
        Europe                                          8%                    9%                    9%
        Japan                                            4%                    4%                    5%

        Consolidated  Revenue  Analysis: 

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