TSMC sees third quarter profits decline

TAIPEI: Chipmaking giant Taiwan Semiconductor Manufacturing Co (TSMC) on Thursday said its third quarter profit fell 1.3% compared to same period a year ago amid sluggish demand for smartphones and computers.

Its net income in the three months through September slipped to Tw$75.33 billion ($2.3 billion), its first earnings decline in three years, according to Bloomberg News.

The world's biggest contract microchip producer -- which is known to be a supplier of Apple -- is seeing earnings slip as it vies with regional rivals such as Samsung and Chinese firms in a weakening smartphone and electronics market globally.

"Due to a weaker global economy, a stronger US dollar environment and a volatile financial market, the electronic device market has been negatively impacted," said co-chief executive Mark Liu.

An "unexpected" slowdown in the Chinese economy also dragged on demand, Liu said at an investor conference on Thursday.

Liu said the firm expects to see the global smartphone market expand by 10 percent this year, but forecasts no growth in the semiconductor industry because of a large build-up in inventories.

Revenue in the third quarter was up 1.7% year-on-year to Tw$212.51 billion, exceeding an earlier forecast due to a stronger US dollar, the currency in which most of TSMC's sales are denominated.

The company's capital expenditure this year would amount to $8 billion, about $3 billion less than earlier expectations, said chief financial officer Lora Ho.

The slash in spending was a surprise, analysts said, indicating concern about the outlook for next year because the cut affects expansion of TSMC's facilities.

Global smartphone shipments are expected to increase 10.4% this year, significantly slower than the 27.5% growth in 2014, according to technology market researcher IDC.

Still, smartphones will continue to "provide momentum" for the next two to three years, especially in terms of the demand for silicon components used in high-end devices, said Liu.

"The high-end smartphones, which provide richer features, higher performance and lower power consumption will continue to drive the demand of leading edge technologies," he said.

"We stand to benefit from this trend."

TSMC remains tight-lipped about its clients, refusing to officially confirm it is an Apple chip supplier.