TSMC Reports First Profit Drop in Two Years on Weak Demand
Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of chips, posted its first profit decline in almost two years and cut its expansion plan after Europe’s debt crisis forced clients to scale back orders.
Second-quarter net income fell 11 percent to NT$36 billion ($1.3 billion) from NT$40.3 billion a year earlier, the Hsinchu, Taiwan-based company said in a statement today. The average of 15 analyst estimates compiled by Bloomberg was for profit of NT$36.4 billion.
Slowing demand for computers and concerns about Europe’s debt are forcing clients including Qualcomm Inc. (QCOM) to cut their sales expectations. TSMC, Asia’s second-largest buyer of chip- making equipment, cut its forecast for capacity expansion this year, citing “the weakened economic condition,” the statement said.
“Customers are being cautious because they’re taking a macro view which indicates the global economic recovery may not be as strong as expected,” Taipei-based Macquarie Group Ltd. analyst Michael Liu, who cut his 2011 earnings forecast for TSMC by 15 percent, said before today’s announcement. “PC orders have been weak, while smartphone demand won’t be enough to make up for the wider slowdown.”
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