July 27 (Bloomberg) -- Chartered Semiconductor Manufacturing Ltd., the world's third-biggest maker of customized chips, posted its first loss in seven quarters on price declines and taxes.

The second-quarter net loss was $24.7 million, or 11 cents per American depositary share, compared with profit of $12.9 million, or 4 cents, a year earlier, Singapore-based Chartered said today. The loss, which included a $28.5 million tax expense, was wider than company and analyst estimates. Sales fell 11 percent to $324.3 million.

Chartered said it may report a loss of as much as $5 million this quarter on weaker demand from computer makers. Advanced Micro Devices Inc., a Chartered client and the world's second- biggest maker of computer processors, posted a loss on July 19, and industry leader Taiwan Semiconductor Manufacturing Co. said profit slid as demand eased from handset makers.

``Their biggest customer is not doing very well,'' said Patrick Yau, a Macquarie Securities Ltd. analyst in Singapore, referring to Advanced Micro. Chartered's ``adoption of advanced technology is being delayed'' partly because customers are holding back orders, said Yau, who has an ``outperform'' rating on the stock.

Shares of Chartered dropped 4 percent to S$1.20 in Singapore, while the Straits Times Index declined 2.4 percent. The stock has lost 6.3 percent this year, trailing a 17 percent gain for the benchmark.

Advanced Micro

Chartered, which already makes computer processors for Advanced Micro using 90-nanometer technology, said today it has been selected by the Sunnyvale, California-based company to produce chips using the more advanced 65-nanometer standard.

For the full year, ``we are concerned with our 90-nanometer business, given the weakness of our largest customer in the computer space,'' Chief Executive Officer Chia Song Hwee said in an interview.

The customer will also delay orders of 65-nanometer chips by ``one or two quarters,'' he said, without identifying the company.

Chartered, which also makes processors for Microsoft Corp.'s Xbox 360 console, expects ``substantial'' growth in game chips to lead to ``strong momentum'' for 65-nanometer chip sales in the third quarter.

A nanometer, one-billionth of a meter, measures the size of transistors on a chip. A smaller size allows slimmer semiconductors to be made and more chips to be cut from each silicon wafer.

Game Chips

Third-quarter earnings will probably range from a loss of $5 million to a profit of $5 million, Chartered said. Sales are estimated to decline to $332 million to $344 million because of weaker demand from computer-related customers.

In the third quarter of 2006, profit was $24.4 million on sales of $355.3 million.

The company was expected to earn second-quarter net income of $2 million, according to the median estimate of five analysts Bloomberg surveyed. Estimates ranged from a loss of $2.9 million to a profit of $4.4 million.

On April 27, Chartered forecast second-quarter results to range from a $5 million loss to a $5 million profit.

The company had a higher effective tax because forecast losses from ``leading-edge technologies'' were wider than expected. These losses aren't tax deductible, Chartered said.

The made-to-order foundry market this year ``won't perform as well'' as the overall industry, whose sales will probably rise between 3 percent and 4 percent, Rick Tsai, chief executive officer of Hsinchu-based Taiwan Semiconductor, said yesterday.

Sales Breakdown

Chartered's share of second-quarter sales from the computer industry fell to 30 percent, the lowest in a year, from 43 percent in the first quarter.

Consumer electronics, including game players, accounted for 26 percent of second-quarter sales, falling from 41 percent a year earlier. Communications, which includes mobile phones, generated 41 percent of sales, rising from 32 percent a year ago.

Gross margin, or the percentage of revenue minus production costs, narrowed to 18.5 percent in the second quarter, from 24.2 percent a year earlier.

Its average selling price per eight-inch wafer declined 17 percent from a year earlier to a two-year low of $908.

Third-quarter average selling prices will fall as much as 7 percent from the second quarter, to between $846 and $886 per eight-inch wafer, the company said.

Wafer shipments in the third quarter are estimated to rise 10 percent from the second quarter. Capacity utilization is expected to be around 84 percent, rising from 74 percent a year earlier.

Second-quarter revenue from 90-nanometer and 65-nanometer chips slid to a combined 19 percent, from 24 percent a year earlier, Chartered said.

The company forecast shipments of chips based on these advanced technologies will decline this quarter, offset by higher amounts of 130-nanometer and other lower value chips.

To contact the reporter on this story: Janet Ong in Beijing at jong3@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net.

Last Updated: July 27, 2007 05:17 EDT