02.23.2001
Foundry utilization said to drop to 55-60% in 2Q01

• Press reports suggest that foundry utilization in 2Q01 will drop to 60% and below, with 10% of capacity going to DRAM. Our industry sources confirm that utilization will see a 10-15% fall-off QoQ into 2Q01 for both TSMC (2330 'Tai Ji Dian') and UMC (2303 'Lian Dian').

• Particularly low demand for PLD and communications IC, which accounts for one-third of total foundry demand, is behind the speculation. It is becoming more and more apparent that inventory burn in this sector will not see completion until after 1H01.

• Sensitivity models we have conducted on TSMC and UMC (Daily Focus, 13 and 16 February) show that with a 5% drop in annualized utilization compared to our base case indicates further declines will come in 2Q01 and 3Q01. TSMC's and UMC's 2001 earnings will see corresponding declines, yielding in our analysis 2001 EPS scores of NT$3.60 and NT$2.67, respectively. We reiterate our LONG-TERM BUY recommendation on TSMC and UMC.

LindaLiu@Primasia.com +886-[0]2-2547-8867