Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, yesterday reported its weakest quarterly net profit in two years, but the company gave a better-than-expected outlook for the current quarter on the back of an initial boost caused by new advanced 28-nanometer technology and a weak local currency.
In the third quarter, TSMC’s net profits tumbled 35.2 percent year-on-year and were down 15.5 percent quarter-on-quarter to NT$30.4 billion (US$1.01 billion), on sluggish end product demand and excessive inventory. The third-quarter profit marked the lowest level since the second quarter of 2009, during which the firm made NT$24.44 billion profit.
Overall, TSMC’s revenues would grow 9 percent in US dollar terms this year, outpacing the global semiconductor industry’s 1 percent expansion and global contract chipmakers’ 4 percent increase in revenues, the Hsinchu-based chipmaker said.
This quarter, increasing uncertainty about future end-product demand amid the eurozone debt crisis has continued to prompt customers to reduce their inventories, which fell to lower than seasonal levels at the end of the third quarter, TSMC chairman and CEO Morris Chang (張忠謀) told an investor conference yesterday.
To cope with weak customer demand, TSMC decided to cut its capital spending for this year slightly to US$7.3 billion from US$7.4 billion. Next year, its capital expenditures would be lower than this year, Chang said.
TSMC expects revenues to fall between NT$103 billion and NT$105 billion this quarter, down 1.39 percent to 3.27 percent from NT$106.48 billion last quarter, but better than the 4 percent decline projected by Credit Suisse analyst Randy Abrams.
“TSMC has secured a good position in landing orders for application processors used in smartphones and tablets. Besides, a lot of companies are launching new products,” Abrams said yesterday. “TSMC is holding firm and keeping its technological leadership.”
TSMC, which led rivals in starting commercial production of chips using 28-nanometer technology this quarter, expects revenues from the advanced chips to account for 2 percent of its fourth-quarter revenues and to rapidly grow to more than 10 percent in the second half of next year.
Handset chip designer Qualcomm Inc and graphics processing unit maker Nvidia Inc are among TSMC’s 28-nannometer clients.
Chang expected inventory digestion in the semiconductor supply chain to come to an end this quarter. He said that, perhaps, “we may blink and suddenly find a surge [of orders] that’s amazingly strong [in March or April],” similar to the strong rebound that happened in 2009.
“The business climate now is not as bleak as it was in 2008,” Chang said.
This quarter, gross margin would improve to between 43.5 percent and 45.5 percent, from 42 percent last quarter, TSMC said, compared with the 41.7 percent estimated by Credit Suisse.
TSMC expects the New Taiwan dollar to depreciate by 4 percent to about NT$30.3, from NT$29.12 in the third quarter, which would help boost its gross margin by 1.7 percentage points.
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