Zeev's Turnips Patch-No Politics (ZEEV)

[marketmaven]

GOLDMAN TODAY ------> TMSC Warns on Semis

We met with TSMC on Monday and uncovered what we believe to be a very important data point for the sector. Recall that SPE managements bull case is predicated on higher H205 order levels from customers that have raised their 2005 capex but are currently ordering at low levels. However, TSMC highlighted that approximately $1b of the $2.6b in 2005 capex is already a payable on its balance sheet, which will be recognized as capex when the cash flow payment is made to the
equipment suppliers in Q1 and Q2. In other words, this equipment has already been ordered by and shipped to TSMC. We therefore believe that the equipment companies contention that orders must recover in H205 based on TSMCs higher
capex forecast is not valid. We view this as a significant negative as these facts stand in direct contrast to the bullish case being presented by semi equipment
managements. We maintain our Cautious coverage view.