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TSMC cuts fourth quarter outlook on demand woes

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's biggest contract chipmaker, yesterday trimmed its fourth quarter outlook unexpectedly, signaling deepening economic turbulence is hurting demand more than expected.

In the final quarter of the year, revenues may fall between NT$63 billion (US$1.8 billion) and NT$65 billion, TSMC said in a statement. The company forecast that fourth quarter revenues would be in the range of NT$69 billion to NT$71 billion. The new figure would represent a 30 percent decline in revenues, compared with NT$93 billion TSMC earned in the third quarter.

The "fourth-quarter business will be below the company's previous guidance given on Oct. 30, 2008 due to a reduction of wafer shipments resulting from continuing weakness in global economic conditions," the Hsinchu-based chipmaker said in a statement.

"The revision is a shock for me. The [revenues] decline is sharper and faster than I had imagined," said Michael Lin (林庸策), who tracks semiconductor industry for Yuanta Securities (元大京華證券).

Reduced demand from TSMC's major customers such as Nvidia Inc and Qualcomm Inc could be the main reason behind the drastic revision, Lin said.

Yesterday, TSMC also cut its forecast for the fourth quarter gross margin and operating margin both by 4 percentage points.

After revision, gross margin may be in the range of 30 percent and 32 percent, according to the statement. Operating profit margin may drop to between 17 percent and 19 percent, it said.


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