Revenue Analysis:
Application -- Fourth quarter revenue was NT$64.6 billion. 4Q08 business saw a sharp decline in the demand for wafer while the NT dollar depreciated 5.6% against the US dollar. Weakness in demand was seen across all applications during the quarter. On a sequential basis, revenues from consumer, computer, and communication applications decreased 39%, 34% and 32%, respectively.
Technology -- Revenue from 65nm reached 27% of total wafer sales during the quarter, up from 25% in the previous quarter. Meanwhile, revenue from 90nm declined from 26% to 21% of total wafer sales. Overall, revenues from advanced technologies (0.13-micron and below) accounted for 65% of total wafer sales, slightly below the 66% in 3Q08.
Customer -- Revenues from IDM customers accounted for 28% of total wafer sales in 4Q08, slightly lower than 3Q08, due to increasing in-sourcing of those customers in the weak business environment.
Geography -- On a sequential basis, there were no major changes on the geographic breakdown, while revenues from customers based in North America accounted for 73% of total wafer sales.
II. Profit & Expense Analysis
II-1. Gross Profit Analysis
(In NT billions) 4Q08 3Q08 4Q07 2008 2007
COGS 44.37 49.89 49.02 191.41 180.28
Depreciation 19.29 19.06 18.50 74.70 73.07
Other MFG Cost 25.08 30.83 30.52 116.71 107.21
Gross Profit 20.19 43.09 44.84 141.75 142.35
Gross Margin 31.3% 46.3% 47.8% 42.5% 44.1%
Gross Profit Analysis:
Gross margin in 4Q08 was 31.3%, down 15.0 percentage points from 3Q08, mainly driven by a sharp decline of production activities, partially offset by cost improvement and a more favorable exchange rate.
Gross margin for full year 2008 was 42.5%, down 1.6 percentage points from 2007, reflecting the impact from the expensing of employee profit sharing (2.3 percentage points).
II-2. Operating Expenses
(In NT billions) 4Q08 3Q08 4Q07 2008 2007
Total Operating Exp. 8.17 10.18 8.08 37.31 30.63
SG&A 3.34 4.20 3.07 15.83 12.68
Research & Development 4.83 5.98 5.01 21.48 17.95
Total Operating Exp. as a % of Sales 12.7% 10.9% 8.6% 11.1% 9.5%
Operating Expenses:
Total operating expenses for 4Q08 decreased by 19.7% sequentially to NT$8.2 billion, or 12.7% of net sales, compared with 10.9% of net sales in 3Q08.
Research and development expenses decreased by NT$1.2 billion quarter- over-quarter, mainly due to a lower level of employee profit sharing.
SG&A expenses decreased by NT$849 million from 3Q08, also due to a sharply lower level of employee profit sharing.
On a full year basis, total operating expenses accounted for 11.1% of net sales in 2008, compared with 9.5% of net sales in 2007, mainly reflecting the impact from expensing of employee profit sharing in 2008 (2.2 percentage points).
II-3. Non-Operating Items
(In NT billions) 4Q08 3Q08 4Q07 2008 2007
Non-Operating Inc./(Exp.) 1.41 1.33 1.69 6.34 7.41
Net Interest Income/(Exp.) 1.18 1.15 1.21 4.76 4.81
Other Non-Operating 0.23 0.18 0.48 1.58 2.60
L-T Investments (0.34) 0.18 0.88 0.70 2.51
SSMC (0.07) 0.15 0.47 0.76 1.18
Others (0.27) 0.03 0.41 (0.06) 1.33
Total Non-Operating Items 1.07 1.51 2.57 7.04 9.92
Non-Operating Items:
For 4Q08, combined result from non-operating income and long-term investments income was a gain of NT$1.1 billion.
Non-operating income was NT$1.4 billion, up from NT$1.3 billion in 3Q08, primarily due to foreign exchange gains and no additional impairment losses on idle assets as compared to 3Q08. Meanwhile, the gains were partially offset by impairment losses of financial assets from venture capital funds by about NT$481 million in this quarter.
Net investment losses in the quarter were NT$340 million, mainly from VIS and SSMC.
For full year 2008, non-operating income decreased by NT$1.1 billion to NT$6.3 billion, mostly due to impairment losses on financial assets and lower valuation on certain marketable securities, partially offset by an increase of foreign exchange gains. Net investment gains decreased by NT$1.8 billion to NT$702 million, mainly due to VIS and SSMC. Combining results from non- operating income and long-term investments, the gain was NT$7.0 billion in 2008, compared with a gain of NT$9.9 billion in 2007.
II-4. PSE Impact
4Q08 3Q08 4Q07 2008 2007
Gross Margin w/ PSE 31.3% 46.3% 43.0% 42.5% 39.7%
Gross Margin w/o PSE 32.8% 48.9% 47.8% 44.8% 44.1%
PSE Impact -1.5% -2.6% -4.8% -2.3% -4.4%
Operating Margin w/ PSE 18.6% 35.4% 29.8% 31.4% 26.0%
Operating Margin w/o PSE 21.5% 40.3% 39.2% 35.9% 34.6%
PSE Impact -2.9% -4.9% -9.4% -4.5% -8.6%
* PSE: Profit Sharing Expenses
** 2007 PSE impact is estimated using the 6/12/2008 closing share price
adjusted for dividends
