UPDATE 2-TSMC signals slow demand for chipmakers after record Q3

* Q3 net T$46.94 bln vs consensus T$38.83 bln

* Sees lower sales, margins in Q4 vs Q3

* Stock up 1.13 pct before results, down 3 pct this year
(Recasts, with comments)

By Argin Chang

TAIPEI, Oct 28 (BestGrowthStock) – Top contract chipmaker Taiwan
Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW: ) forecast
slowing sales and margins for the fourth quarter after a record
profit, underscoring weak chip demand for the sector.

Chipmakers face slowing demand as a faltering global
recovery cuts demand for computers, flat-screen TVs and other
electronic devices that require chips, while TSMC (TSM.N: ) and
its smaller rival UMC (2303.TW: ) have announced bigger capital
spending budgets for this year which could lead to an
oversupply of chips.

TSMC forecast its fourth-quarter sales would fall as much
as about 5 percent from the third quarter, largely in line with
market expectations. It also expects to see profit margins
falling in the same period.

“The PC sector is still weak and we are not sure if the
sector’s inventory can be digested early next year. If not,
that’s bad news for foundries and others in the supply chain,”
said John Chiu, a fund manager at Fuh Hwa Securities Investment
Trust.

Market research firm iSuppli Corp said that global
semiconductor sales next year could climb by 5.1 percent, a
significant slowdown from this year’s projected growth of 32
percent. [ID:nTOE68T0A4]

“You’ve got 10 percent unemployment in the United States, 5
percent in Taiwan and budgets being cut in Europe,” said John
Brebeck, head of research, Yuanta Investment Consulting in
Taipei.

“It’s not a pretty macroeconomic picture. We’re going
through a global rationalisation of inventory.”

RIVALS, RESULTS

Korean chip maker Hynix (000660.KS: ) warned on Thursday that
that overall demand for DRAM memory chips would remain subdued,
as it posted its second-best quarterly profit ever thanks to
higher shipments and a shift to premium chips [ID:nTOE69P06X].

Earlier in the week Texas Instruments (TXN.N: ) said consumer
chip weakness would persist this quarter and growth in
industrial chips will be less spectacular after a year of
strong growth. [ID:nN25274454].

A day earlier, UMC (UMC.N: ) forecast wafer shipments would
decline in the fourth quarter after reporting its best
quarterly profit in three years. [ID:nTOE69Q06E]

“In the third quarter, demand for TSMC’s wafers continued
to increase, and wafer shipments in all major semiconductor
market segments, except computers, increased from their
second-quarter levels,” TSMC said in a statement.

TSMC saw revenues in the fourth quarter at between T$107
billion and T$109 billion, versus the third quarter’s T$112.25
billion, with a gross profit margin of between 48-50 percent
and an operating profit margin of about 35.5-37.5 percent.

TSMC, which supplies chips to major clients including Texas
Instruments and Nvidia (NVDA.O: ), made a net profit of T$46.94
billion ($1.5 billion) in July-September, up from T$30.55
billion a year ago and T$40.3 billion in the second quarter.

Analysts had forecast a profit of T$38.83 billion in the
third quarter, according to a consensus forecast of 12 analysts
from Thomson Reuters I/B/E/S.

Earnings also got a boost from non-operating income, which
jumped to T$5.7 billion in the third quarter from T$1.4 billion
in the second.

Fears over a supply glut and a stronger Taiwan dollar that
could cause foreign exchange losses have driven investors away
from TSMC and UMC, whose shares have fallen about 3 percent and
15 percent respectively this year. Taiwan’s main TAIEX index
(.TWII: ) is about flat for the year.
(US$1=T$30.7)
(Additional reporting by Baker Li and Ralph Jennings; Writing
by Jonathan Standing; Editing by Muralikumar Anantharaman)

UPDATE 2-TSMC signals slow demand for chipmakers after record Q3