TSMC sees six months of weaker sales after record third-quarter profit

TAIPEI Thu Oct 25, 2012 11:27am BST

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TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (TSMC) forecast two quarters of weaker revenue but said the boom in mobile devices that drove it to record third-quarter profit would fuel a rebound from April.

Cutting-edge 28 nanometer technology has put the world's biggest contract chip maker ahead of rivals as consumers shift to mobile gadgets like Apple Inc's iPad and iPhone and away from personal computers.

"We think the reason (for rebound in Q2) is the strength of mobile demand," Chairman Morris Chang told an investor briefing. "We expect mobile products to be strong for a number of years."

Shipments of chips made by 28-nanometer process technology, which can cram much more computing power into smaller chips and is widely sought after for mobile devices, more than doubled during the third quarter and accounted for 13 percent of total wafer revenues, TSMC said.

But rising inventory levels at end-users like automakers and computer makers have stoked concerns, and TSMC said inventory adjustment will cause a fall in fourth-quarter revenue and a "modest dip" in the first quarter of 2013.

Texas Instruments Inc, a key TSMC client, this week forecast surprisingly weak revenue for the fourth quarter, saying its customers were nervous about demand amid a deteriorating global economy.

Chipmakers Broadcomm Corp and LSI Corp have also recently forecast weak fourth-quarter revenue. Chipmakers tied to the PC chain have been among the hardest hit as customers gravitate to mobile devices instead.

RECORD PROFIT

TSMC said net profit in the July-September period jumped 62 percent to a record T$49.3 billion ($1.7 billion) from a year earlier, above the T$45.3 billion average estimate of 22 analysts polled by Thomson Reuters I/B/E/S.

The figure compares with T$41.8 billion in the second quarter.

TSMC said it saw revenue in the fourth quarter at between T$129 billion and T$131 billion, versus the third quarter's T$141.4 billion. Its gross margin would dip to between 45 percent and 47 percent from 48.8 percent in the third quarter.

Capital spending next year would be in "the same ballpark" as this year, Chang said. Spending this year will total $8.3 billion.

TSMC's clients include Texas Instruments and Nvidia.

Before the results announcement, TSMC shares closed down 0.7 percent, in line with the broader market. The shares are up 12 percent for the year to date, compared with a 2.7 percent rise for the broader market.

($1 = 29.2845 Taiwan dollars)

(Additional reporting by Clare Jim; Writing by Jonathan Standing; Editing by Edwina Gibbs)

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