TSMC and SMIC left out of chip rebound

Taiwan Semiconductor Manufacturing Co and Semiconductor Manufacturing International Corp are still struggling despite a rebound in the global chip market.

While semiconductor equipment supplier ASM Pacific Technology last month reported a return to profit, chipmakers such as TSMC and SMIC felt only more pain.

Analysts said weaker prices for dynamic random access memory (DRam), the most common type of memory chips for computers, meant TSMC, the world's largest chipmaker, and SMIC, the mainland's largest player, were not benefitting from the general upturn in the market.

On July 26, TSMC said its net income slumped 25.1 per cent to NT$25.48 billion (HK$6.06 billion) for the three months to June from a year ago while sales fell 8.8 per cent to NT$74.92 billion. On the same day, SMIC posted a net loss of US$2.1 million in the second quarter, compared with a profit of US$1.35 million for the same period last year.

SMIC was hit by a 30 per cent drop in average selling prices for DRam products. First-half sales grew 3.7 per cent to US$375 million.

'TSMC has sneezed and the cold is spreading,' said Rick Hsu, an analyst at Nomura International. 'SMIC appears to be suffering more from the industry leader's aggressive pricing to secure volume and it can only enjoy a profitless recovery.'