Taiwan Semiconductor Manufacturing Company Ltd, the world’s largest supplier of made-to-order chips, has posted record net profit for the third quarter, but the company’s chairman followed the industry trend by warning of leaner times in the fourth quarter and next year.
For the quarter ending September 30, TSMC posted net income up 84% at TWD 29.93 billion ($829 million), from TWD 15.16 billion ($450 million) in the year-ago quarter. It attributed the increase to strong demand for chips used in digital cameras, notebooks, mobile phones, and other devices. The third-quarter earnings beat the company’s previous quarterly record of TWD 23.41 billion ($695 million), set in the second quarter.
Revenue for the third quarter was equally robust, rising 27% to TWD 69.73 billion ($2.07 billion), from TWD 54.87 billion ($1.63 billion) in the year-ago quarter. The company’s results were also boosted by a strong 4% on-quarter increase in shipments of custom-made chips to clients such as Texas Instruments Inc and graphics chip developer Nvidia Corp.
Yet after announcing the record earnings, TSMC’s chairman and CEO, Morris Chang, joined the majority of the world’s chipmakers in predicting leaner times for the final quarter of 2004 and for 2005. Wafer shipments are to decrease by a single-digit percentage point sequentially, he said.
Chang also expressed pessimism about the total semiconductor sector in 2005, but said TSMC would fare better than most companies. He said this is because foundries usually outperform the semiconductor sector as a whole.
The Hsinchu, Taiwan-based company is considered to be a good bellwether for the global tech industry because it supplies custom-made wafers to a number of well-known electronic goliaths including Motorola Corp, Philips Electronics NV, and Texas Instruments Inc.
This month there has been a flurry of warnings in the chip sector about the future, which has led to nervousness across the markets. This was brought home when Intel Corp and Samsung Electronics Co, the world’s two biggest chipmakers, pointed to a slowdown in the semiconductor industry.
In reality, what is happening is a brief pause in the progress of the sector. Most companies are reporting strong increases in revenue and income over the same period a year ago. However, their customers are worried about the prospect of a slowdown and are running down inventories.