TSMC Reports Second Quarter EPS of NT$0.94

Application - Second quarter revenue was NT$74.21 billion, representing 87.9% sequential growth, due to improved demand outlook, electronics companies' launching new products, and customers' inventory restocking. In 2Q09, demand strongly rebounded across all applications compared to 1Q09. On a sequential basis, revenues from computer, communication, and consumer applications increased 128%, 100%, and 99%, respectively.

Technology - Revenue from 45/40nm exceeded 1% of total wafer sales in 2Q09, with wafer shipments tripling those of 1Q. Meanwhile, revenue from 65nm and 90nm were 28% and 23% of total wafer sales, respectively. Overall, revenues from advanced technologies (0.13-micron and below) accounted for 65% of total wafer sales.

Customer - Revenues from IDM customers accounted for 18% of total wafer sales in 2Q09, lower than 23% in 1Q09, primarily due to continued in-sourcing of IDM customers.

Geography - In 2Q09, revenues from customers based in North America accounted for 65% of total wafer sales, lower than 68% in 1Q09. Meanwhile, sales from customers in Asia Pacific, China, Europe, and Japan accounted for 18%, 3%, 11% and 3% of wafer sales, respectively.

    II. Profit & Expense Analysis

    II - 1. Gross Profit Analysis

    (In NT billions)                          2Q09     1Q09     2Q08

    COGS                                      39.91   32.02    47.92
    Depreciation                              18.54   18.97    18.23
    Other MFG Cost                            21.37   13.05    29.69

    Gross Profit                              34.30    7.48    40.22

    Gross Margin                              46.2%   18.9%    45.6%



    II - 1.1. QoQ Comparison

    1Q09 Gross Margin                              18.9%
    Impact to Gross Margin                          ppts
    Higher utilization                              48.2
    Non-wafer-related business                      -8.4
    One-time and miscellaneous                      -6.7
    Higher profit sharing expense                   -2.0
    Inventory valuation impact*                     -1.5
    Declined standard margin                        -1.4
       Price decline: -1.7 ppts
       Cost improvement: +1.4ppts
       Unfavorable mix: -1.1 ppts
    Unfavorable FX rate                             -0.9
    2Q09 Gross Margin                              46.2%



    II - 1.2. YoY Comparison

    2Q08 Gross Margin                                45.6%
    Impact to Gross Margin                            ppts
    Favorable FX rate                                  3.7
    One-time and miscellaneous                         2.8
    Lower utilization                                 -4.1
    Inventory valuation impact*                       -1.5
    Declined standard margin                          -0.3
       Price decline: -5.1 ppts
       Cost improvement: +5.9 ppts
       Unfavorable mix: -1.1 ppts
    2Q09 Gross Margin                                46.2%



    Gross Profit Analysis:

Gross margin in 2Q09 was 46.2%, up 27.3 percentage points from 1Q09. A sharply increased utilization rate contributed 48.2 percentage points to gross margin, while several other elements acted to offset partially the increase in gross margin, including a lower percentage of total revenue from non-wafer- related business (-8.4 percentage points), one-time and miscellaneous items (- 6.7 percentage points), increase in employee profit sharing (-2.0 percentage points), adverse effect of ROC SFAS No.10 on inventory valuation (-1.5 percentage points), decline in standard gross margin (-1.4 percentage points), and unfavorable exchange rate (-0.9 percentage point).

Gross margin in 2Q09 increased 0.6 percentage point compared with 45.6% in 2Q08, due to favorable exchange rate (+3.7 percentage points), one-time and miscellaneous items (+2.8 percentage points), partially offset by lower utilization rate (-4.1 percentage points), negative impact from the adoption of ROC SFAS No.10 (-1.5 percentage points), and decline in standard gross margin (-0.3 percentage points).



    II - 2. Operating Expenses

    (In NT billions)                           2Q09     1Q09      2Q08

    Total Operating Exp.                       9.17     6.27      9.85
    SG&A                                       4.07     2.54      4.45
    Research & Development                                5.10          3.73            5.40
        Total  Operating  Exp.  as  a  %  of  Sales            12.3%        15.9%          11.1%

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