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TSMC bond plan aimed at acquisitions: analyst

2011/08/10 14:35:39

Taipei, Aug. 10 (CNA) A newly unveiled plan by Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker, to issue corporate bonds is aimed at raising funds for acquisitions to expand its non-core business to weather a cyclical slowdown in the global foundry industry, an analyst said Wednesday.

"I expect TSMC to announce the acquisition of assets in the renewable energy sector and to finance the deal through the bond sale," Grand Cathay Securities analyst Mars Hsu said.

"The move to raise funds from the current interest rate environment is a good deal for TSMC," Hsu said.

TSMC said in a statement a day earlier that the board of directors approved a plan to issue up to NT$35 billion (US$1.2 billion)-worth of straight corporate bonds "to secure long-term, low fixed-cost funding," but did not elaborate.

TSMC is among several local high-tech companies that are gearing up to go beyond their core businesses and enter the renewable energy sector in a bid to diversify and boost profitability.

So far, TSMC has entered the solar energy and LED lighting businesses.

In an investor conference held in late July, TSMC Chairman Morris Chang cut his forecast of 2011 growth for the global foundry business to 7 percent from 15 percent he had predicted at the beginning of this year.

Chang has repeatedly said the world's semiconductor sector is growing at a pace lower than market expectations amid a slowdown in the global economy.

"TSMC tends to make investments in a market-down cycle," Hsu said. "The bond sale indicates that the company will continue to expand at the moment. And this time, expansion in the non-core business is very likely."

TSMC expects sales for the third quarter of this year to fall 6 percent-8 percent from the first quarter to a range between NT$102 billion and NT$104 billion, while rival United Microelectronics Corp. anticipates that its third quarter sales will drop 11 percent-13 percent from the second quarter's NT$28.15 billion.

(By Jackson Chang and Frances Huang)