Taiwan Semi Sees Recovery in Chip Demand

HSIN-CHU, Taiwan ( TheStreet) -- Taiwan Semiconductor's ( TSM) American Depositary Receipts were surging Thursday after the chip maker said demand was bouncing back.

TSMC followed semiconductor brethrens Texas Instruments ( TXN) and Intel ( INTC) in projecting a rosier outlook for the industry.

Midway through Thursday's session, TSMC ADRs had gained 73 cents, or 7.2%, to $10.83, on volume of 14 million shares. Average daily turnover is 19 million.

Earlier in the morning, TSMC reported a 16% revenue drop, with sales landing at NT$74.2 billion, below the year-earlier quarter's NT$88.1 billion.

But demand for wafers has picked up, the company said, and revenue surged 88% sequentially. TSMC pointed to an improved macro-economic outlook, customers kicking off new electronics products and inventory restocking as the primary drivers.

Net income shrank to NT$24.4 billion, or NT$0.94 a share, compared to NT$28.8 billion, or NT$1.09 a share in the year-ago. But earnings showed marked improvement from the first quarter's NT$0.06 profit.

Gross margins also swelled to 46.2% from 18.9% in the previous quarter.

Looking ahead, TSMC gave a cheery assessment. Finance chief Lora Ho said she expects a "good third quarter." She lifted the company's revenue targets to between NT$88 billion and NT$90 billion, and said TSMC plans to add manufacturing capacity.

"Due to improved demand outlook for 2010 and a more aggressive technology strategy, TSMC 2009 capital expenditure is expected to be above both the 2008 expenditure of US$1.9 billion and the previously guided US$1.5 billion, and is expected to be around US$2.3 billion," Ho said in a press release.

-- Reported by Sung Moss in New York

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