06.11.2001
TSMC and UMC deliver a disappointing May

• TSMC (2330 'Tai Ji dian’) reported May revenue of NT$8.55b, down 7.4% MoM. UMC (2303 'lian dian') reported May revenue of NT$4.95b, down 15% MoM. Both figures are 5% below our forecast. In the US, Micron's Crucial website reported a flat 128Mb SDRAM web price yesterday, while its 64Mb SDRAM dropped 11.5% DoD. Micron's DDR prices declined between 5-11%.

• TSMC had said previously that 2Q01 revenue would see a 26% decline. Should the company deliver this on expectation, it will have to meet a MoM revenue increase of 33% in June 01. At the same time, UMC predicted a 30% revenue decline in 2Q01, implying that a 16% MoM increase is needed for the June target to be reached. Both targets seem too aggressive at the moment, and we will be downgrading both companies' financials for the current quarter.

• However, TSMC reiterated Book-to-Bill ratios were above 1 in both April and May, pointing an up-tick in revenue expected for June and July. UMC also said they have seen stronger bookings during June. Intel (US) recently said it had seen signs of stabilization and recovery in the PC sector in the recent pre-quarterly announcement, and we have heard similar bullish tones from local motherboard makers during last week's Computex show.

• VB Primasia Investment Opinion: We maintain our L/T BUY recommendation on both TSMC and UMC.

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