Chartered Semiconductor has reiterated its disappointing outlook for 4Q07 as the quarter is essentially progressing in line with what it had anticipated earlier. During its 3Q07 results, Chartered guided for revenue to fall 2-6% QoQ to US$334-346m while net profit is expected to come in at US$1-11m. It was also looking for ASP to vary between -3% and +1% QoQ at US$858-898, and with utilization rate to hover at around 78-84%. But things are unlikely to improve much in 1Q08, which is seasonally the slower quarter. And for the rest of the year, there may be a risk that a sharp slowdown in the US economy could dampen the expected recovery from 2Q08 onwards. We are leaving our estimates for 4Q07 and FY07 unchanged but have revised down our FY08 numbers marginally to reflect a more cautious outlook for the semicon industry. We are also paring our fair value from S$1.13 (based on 1.3x blended FY07/FY08F NTA) to S$1.04 (1.2x FY08F NTA). We continue to retain our HOLD rating.
Reiterates disappointing 4Q07 outlook. Chartered Semiconductor has reiterated its disappointing outlook for 4Q07 as the quarter is essentially progressing in line with what it had anticipated earlier. During its 3Q07 results, Chartered guided for revenue to fall 2-6% QoQ to US$334-346m while net profit is expected to come in at US$1-11m. It was also looking for ASP to vary between -3% and +1% QoQ at US$858-898, and with utilization rate to hover at around 78-84%. Management previously said that this was mainly due to continuing lower utilization of its leading edge capacity, hit by lower demand of 90nm wafers from the computer sector and the expected seasonal impact of a 65nm product in the consumer sector. In contrast, TSMC had guided for a 3-6% QoQ increase in revenue and for gross margin to improve from 45.8% in 3Q07 to 46-48%.
Weaker semicon outlook from Gartner. But things are unlikely to improve much in 1Q08, which is seasonally the slower quarter. And for the rest of the year, there may be a risk that a sharp slowdown in the US economy could dampen the expected recovery from 2Q08 onwards. Gartner Inc. has pulled down its forecast for the semiconductor industry for this year and next, warning times will only get tougher as the industry moves to 32nm process technology. The industry could still slip into recession next year, depending on issues in the broader economy. The market watcher expects the chip industry to grow just 2.9% this year, down from 3.9% forecast earlier and growth will only reach 6.2% in 2008, down from 8.2%. The good news is Gartner is now forecasting 8.5% growth in 2009, up from 6.1%. Overall, Gartner projects a 4.8% compound growth rate for semiconductors from 2006 to 2011.
Revising down fair value to S$1.04. We are leaving our estimates for 4Q07 and FY07 unchanged but have revised down our FY08 numbers marginally to reflect a more cautious outlook for the semicon industry. We are also paring our fair value from S$1.13 (based on 1.3x blended FY07/FY08F NTA) to S$1.04 (1.2x FY08F NTA). We continue to retain our HOLD rating.
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