TSMC, UMC caution Taiwan dollar surge will affect profit margins

Taipei, May 2 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) on Friday cautioned that a sharp appreciation of the Taiwan dollar as seen recently would negatively impact their revenue and profit margins.

The Taiwan dollar increased by NT$0.953 to close at NT$31.064 against the U.S. dollar on Friday -- an increase of 3.07 percent -- marking the largest single-day gain since 2002, driven by significant foreign capital inflows.

TSMC said that for every 1 percent appreciation of the Taiwan dollar, its operating margin is estimated to decline by 0.4 percentage points.

Nonetheless, the company is maintaining its second-quarter revenue forecast of US$28.4 to US$29.2 billion, explaining that based on an assumed exchange rate of NT$32.5 to US$1, it expects gross margins between 57-59 percent, and operating margins between 47-49 percent.

UMC also acknowledged the impact of a stronger Taiwan dollar on profits, though it described the effect as relatively limited.

Similar to TSMC, UMC estimates that each 1 percent appreciation reduces its gross margin by 0.4 percentage points.

The company said it practices natural hedging by promptly converting U.S. dollar payments into Taiwan dollars to mitigate exchange rate risks.