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Weak foundry sales spell trouble for tech industry

Posted: 13 Jul 2015 ?? ?Print Version ?Bookmark and Share

Keywords:foundry? semiconductor industry? chip?

The world's two biggest chip foundries reported negative monthly revenue figures for the first time in more than three years, sending a warning signal to the entire tech industry.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest chip foundry, said its revenue in June this year dropped by 0.6 per cent compared with the same month a year ago. That's the first time the company recorded negative sales growth since January 2012.

TSMC's next-door neighbour, United Microelectronics Corp. (UMC), said its June revenue fell by 2.8 per cent from the same period a year ago.

TSMC and UMC together account for more than 60 per cent of the world's foundry production and as such, are key bellwethers for global economic health. During the first five months of 2015, both companies recorded sliding sales growth, capped off by the negative numbers in June, the most recent month for which the companies have reported sales figures.

To be sure, the declines in sales so far are small. Yet they are worrying because the traditional pattern for the tech industry is for the second half of the year to be better than the first half of the year as electronics companies gear up for the yearend holiday season.

On April 16, during TSMC's announcement of first-quarter 2015 results, the company said the semiconductor industry's annual growth had adjusted down from 5 per cent earlier to 4 per cent due to the global macroeconomic situation. TSMC added that the overall foundry growth rate would slow as well to about 10 per cent.

At the time, the company said it expects a recovery in second half of this year and overall double-digit growth in revenue compared with 2014. It will be interesting to hear TSMC's views when it announces its second-quarter results and outlook on July 16.

By comparison, in its April 29 announcement of first-quarter results, UMC said it has no visibility regarding the outlook for the second half of this year. The company is also scheduled to present its second-quarter results later this month.

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