Taiwan Semiconductor Manufacturing Company Limited Q1 2010 Earnings Call Transcript
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Q1 2010 Earnings Call Transcript
April 27, 2010 8:00 am ET
Executives
Elizabeth Sun – Head of IR
Lora Ho – VP, CFO and Spokesperson
Shang-Yi Chiang – SVP, R&D
Morris Chang – Chairman and CEO
Analysts
CJ Muse – Barclays Capital
Randy Abrams – Credit Suisse
Pranab Kumar – Daiwa Securities
Dan Heyler – Bank of America/Merrill Lynch
JJ Park – JPMorgan
Mehdi Hosseini – FBR
Dan Malkoun – Moore Capital
Mike McConnell – Pacific Crest Securities
Presentation
Operator
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Taiwan Semiconductor Mfg. Q3 2009 Earnings Call Transcript
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Taiwan Semiconductor Q2 2009 Earnings Call Transcript
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Taiwan Semiconductor Manufacturing Company Limited Q1 2009 Earnings Call Transcript
Welcome to TSMC's first quarter 2010 results webcast conference call. This conference call is being webcast live via the TSMC website at www.tsmc.com, and only in audio mode. (Operator Instructions)
I would now like to turn the conference over to Dr. Elizabeth Sun, TSMC's Head of Investor Relations.
Elizabeth Sun
Thank you, Eric. Good morning, and good evening, everyone. Welcome to TSMC's first quarter 2010 conference call. Joining us on the call are Dr. Morris Chang, our Chairman and Chief Executive Officer, Dr. Shang-Yi Chiang, TSMC's Senior Vice President and Head of R&D, Ms. Lora Ho, our Vice President and Chief Financial Officer.
The format for today's conference call will be as follows. First, Lora will summarize our operations in the first quarter and give you our guidance for the second quarter. Then, Dr. Shang-Yi Chiang will give you an overview of TSMC's technology. Afterwards, TSMC's Chairman, Dr. Chang will provide his general remark on the business outlook and a couple of key messages. Then, we will open the floor to questions.
For those participants who do not yet have a copy of the press release, you may download it from TSMC's website at www.tsmc.com. Please also download the summary slides in relation to today's quarterly review presentation. I would like to remind all listeners that following discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements.
Information as to those factors that could cause actual results to differ materially from TSMC's forward-looking statements may be found in TSMC's annual report on Form 20-F filed with the United States Securities and Exchange Commission on April 15, 2010, and such other documents as TSMC may file with or submit to the SEC from time to time. Except as required by law, we undertake no obligation to update any forward-looking statement whether as a result of new information, future events or otherwise.
And now, I would like to turn the call over to Lora.
Lora Ho
Thank you, Elizabeth. Good morning and good evening to everyone. Welcome to our first quarter earnings conference call. I will start today's presentation with the financial highlights of first quarter 2010 and follow it by the guidance of our second quarter. Please refer to the quarterly financial summary slide on our website. All dollar figures are in NT dollars unless otherwise stated.
Contrary to our first quarter normal seasonality, the first quarter revenue and the wafer shipments slightly increased. The strength came mainly from the customer demand for communications and consumer related applications, as well as very strong demand for our 40 nanometer technology.
Net sales of NT$92.2 billion increased 0.1% Q-over-Q and 133% year-over-year. Wafer shipments were 2.55 million 8-inch equivalent wafers, up 4.8%, sequentially, and up 185% compared with the same period last year.
Gross margin was 47.9%, representing a 0.6 percentage point decline from the first quarter – from the last quarter, and a 29 percentage point increase from the first quarter '09 level. Operating margin of 37% was up 0.5 percentage point sequentially, and up 33.9 percentage points compared with 1Q09. Earnings per share for the first quarter of 2010 reached NT$1.30. ROE was 26.3%.
On page 5, let's now take a look at income statement. First quarter gross margin was 47.9%, down by 0.6 percentage point from 48.5% in fourth quarter '09. The increase in depreciation could have been more than offset by other manufacturing costs improvement. However, the effect from the March 4 earthquake resulted in additional costs from tool recovery and mold losses which brought the gross margin by 0.9 percentage point. The unfavorable exchange rate further reduced the gross margin by 0.4 percentage point.
Under a scenario without these two items, our first quarter gross margin could have reached 49.5%, marking first quarter '10 the fourth consecutive quarter of margin improvement.
Operating expense decreased 990 million from the prior quarter, mainly due to lower legal fee after the settlement of big lawsuits. Non-operating income decreased by 430 million from 4Q09, primarily due to the lower litigation compensations and wafer scrap loss resulting from the March 4
th
earthquake.
Net investment gain was 180 million, down 120 million from the prior quarter as SSMC's earnings was reduced by an inventory valuation loss and the less government subsidy. Net margin was 36.5%, up one percentage point, sequentially, and up 32.6 percentage points year-over-year.
Now, let's turn to revenue analysis. Demand in the first quarter was stronger than normal seasonality in all major segments. Consumer segment was the strongest with a 9% sequential growth. Communication and industrial segments both grew 2%, while computer segment declined 3% from the prior quarter. Overall, revenue from communications, computer, consumer and industrial applications accounted for 39%, 32%, 14% and 15% of our wafer sales in first quarter '10, respectively.
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