Taiwan Semiconductor Manufacturing Co. (TSMC) said Thursday net profits in the third quarter dropped 35.2 percent year-over-year, as demand for the company's chips fell because of economic conditions. The company however expects a turnaround next year, when it starts delivering high-performance, 28-nanometer chips for tablets and smartphones.
TSMC, the world's largest contract chip manufacturer, includes mobile chip vendors Nvidia, Qualcomm and Texas Instruments among its customers. Customers have been "de-stocking" their inventories because of uncertainties about the market, TSMC CEO Morris Chang said.
"Obviously, the weakening outlook of the world economy has impacted the demand for semiconductors," he said during a conference call. The company is now forecasting global semiconductor growth to be 1 percent this year, which is lower than the 5 percent the company forecasted earlier in the year, Chang added.
TSMC's net profits for the third quarter were NT$30.3 billion (US$1.0 billion), down from the NT$46.9 billion in the same period a year ago. Net sales reached NT$106.4 billion in the quarter, a 5.1 percent dip from the NT$112.2 billion in the third quarter of 2010.
The company's third quarter sales in its consumer and computer segments also dropped 18 percent and 16 percent respectively compared to the second quarter.
Chang expects the reduction of inventory by its customers to continue until the end of the year. The company's growth will pick up next year, as it plans to produce in volume chips using its 28-nanometer manufacturing process, he said. The technology allows TSMC to build chips for companies like Nvidia and Qualcomm that will deliver higher performance for devices like tablets and smartphones.
"We expect 28 nanometer to be a large source of growth next year," Chang said. While TSMC expects the semiconductor industry to grow by 3 to 5 percent in 2012, its own growth will be several points higher because of its 28-nanometer manufacturing technology, he added.
"I think perhaps after all this de-stocking we may just blink and suddenly find a surge that's amazingly strong," Chang said.
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