TSMC sees more signs of slowdown

Taiwan Semiconductor Manufact-uring Co (TSMC, 台積電) said some customers asked to delay delivery on their orders as personal-computer sales stall.

The delay in shipments for orders already placed comes as the company braces for a decline in demand in this quarter and next, Kenneth Kin (金聯舫), TSMC's senior vice president in charge of worldwide marketing and sales, said in an interview. Kin spoke in Yokohama, where he attended a technology forum sponsored by TSMC.

Kin's comments are further evidence the semiconductor industry's outlook is deteriorating. TSMC's customers, a list that includes chipmakers such as Intel Corp, typically begin building inventories as early as August to prepare for the Christmas shopping season.

"The fourth quarter is going to be pretty tough for everybody," said Ernie Tam, who counts shares in TSMC among the US$2 billion he helps manage for Baring Asset Management Ltd. "The personal computer sector appears to be weak."

The company also counts graphics chipmaker Nvidia Corp among its customers. Nvidia makes the graphics chip for Microsoft Corp's Xbox games console. Its chips are also used in personal computers to enhance graphics capabilities.

"We have seen a slowdown in overall demand," Kin said. "Particularly weak is the PC industry."

This week, market researcher IDC lowered its PC shipment growth forecast for this year to 1.1 percent, or 135.5 million units, from 4.7 percent predicted in June. IDC cut its growth estimate for next year to 8.4 percent, or 147 million units, from its earlier forecast of an 11 percent gain.

IDC's revisions reinforced findings from Intel, which supplies about four fifths of all processors used in personal computers. Intel Chief Executive Officer Craig Barrett said last month PC demand may not rebound during the Christmas season.

In additional to Kin, other TSMC executives share Barrett's views on the strength, or lack thereof, of demand for personal computers and the chips that go in them.

Chief Financial Officer Harvey Chang (張孝威), speaking at a Shanghai technology conference, said TSMC will cut its production target for chips made with 12-inch wafer technology by 50 percent because of slower demand, a company spokesman said.

The company cut its monthly target for production of 12-inch silicon wafers to 5,000 from 10,000 for the remainder of the year, spokesman Tzeng Jinnhaw (曾晉皓) said, confirming a report in a Chinese-language newspaper, citing the chief financial officer. He spoke at a Goldman Sachs Group Inc conference in Shanghai.

The company is one of about five chipmakers in the world producing advanced 12-inch wafers, which yield more than double the number of chips and pare production costs by up to a third.

TSMC accounts for about 65 percent of sales among made-to-order chipmakers, ING Baring Securities Ltd analyst Chris Hsieh said. Taiwan's United Microelectronics Corp (聯電) is the closest rival to TSMC.

TSMC expects demand for chips in the third and fourth quarters to "be flat or slightly decline" from the previous quarters, though it will grow in the second half compared with the same period last year, Kin said. He declined to specify which customers are delaying shipments.

Global sales of semiconductors fell by a third in last year to US$139 billion, their worst-ever annual decline, the Semiconductor Industry Association said in February.