Taiwan Semiconductor Manufac-turing Co (TSMC,
"We see a little drop now," vice president Genda Hu (
TSMC ran at capacity for three straight quarters, pushing profit to a record.
The company's customers including Texas Instruments Inc and RF Micro Devices Inc have cut earnings' forecasts as orders slowed.
Samsung Electronics Co, the world's second-largest chipmaker, said this year's sales growth may halve to 10 percent.
TSMC shares fell a fifth in the past six months compared with a 12 percent decline on the Taiwan Stock Exchange.
UTILIZATION RATE
"TSMC's utilization rate in the fourth quarter should still be close to 100 percent," said Paul Tsai, a fund manager at International Investment Trust (國際投信) in Taipei. "Inventory shouldn't be a serious problem."
TSMC said on July 29 it expects third-quarter and fourth-quarter factory use to exceed 100 percent.
The company said its gross margin, or the percentage of sales left after production costs, will rise in the third quarter to 45 percent from 43.4 percent in the second quarter.
The company estimates the capacity of its equipment assuming there will be periods when it isn't working because of malfunctions, Hu said.
If the equipment exceeds expectations, the company says its factory use is greater than 100 percent. In the second quarter, the so-called utilization rate was 106 percent.
"For three or four quarters, it's a long enough time to hit 100 percent utilization or higher," said Hu, who previously was the head of the Electronics Research & Service Organization, a government-run institute that helped start the nation's chip and flat-panel display industries.
"An inventory correction is taking place," Hu said.
TSMC customer RF Micro, which makes semiconductors for mobile-phone companies, reduced its second-quarter revenue forecast last Tuesday as inventory backlogs led to lower-than-expected sales to some Asian handset customers.
RF Micro's revenue is expected to be US$146 million to US$152.5 million, down from an earlier forecast of about US$166 million, the North Carolina-based company said.
The company said it would have a net loss of US$0.03 to US$0.05 a share, after previously forecasting a profit of US$0.01 to US$0.02 a share.
INVENTORY ADJUSTMENTS
Texas Instruments chief executive Rich Templeton said earlier this month that customer orders slowed primarily because of inventory adjustments.
"The inventory build for TSMC's customers will peak in the third quarter," said Dan Heyler, an analyst with Merrill Lynch & Co in Hong Kong. "Inventory depletion will begin in the fourth quarter."
TSMC also said its market share will decline to the "high 40 percent range" this year from 52 percent last year as smaller rivals pick up orders at a faster rate.
The company's rivals include United Microelectronics Corp (
Semiconductor Manufacturing International Corp (
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