TSMC Drops After Cutting Full-Year Capital Spending Forecast

  • Company cut its global chip-industry growth forecast to zero
  • Slowdown in China economy affecting smartphone demand

Taiwan Semiconductor Manufacturing Co. fell the most in almost a month after cutting its equipment budget as much as 27 percent amid slowing demand for chips and its first profit decline in three years.

Shares dropped 1.8 percent to NT$137.50 in Taipei, the most since Sept. 23. It’s New York-listed depositary receipts lost 2.5 percent. Capital expenditure this year will be $8 billion, from a previous forecast for as much as $11 billion, Chief Financial Officer Lora Ho said Thursday. Third-quarter net income fell 1.3 percent to NT$75.3 billion ($2.3 billion).

TSMC’s second cut in spending for plants and machinery this year comes after Intel Corp. this week lowered its own outlook for capital expenditure and said a slowdown in server demand could threaten sales of its semiconductors. While TSMC gets some chip orders to supply Apple Inc.’s latest iPhone, those for other smartphones and personal computers are tepid.

“The surprise huge 2015 capex guidance cut also raises doubts about the 2016 order outlook: the cut affects 2016 installed capacity,” BNP Paribas SA Hong Kong-based analyst Szeho Ng wrote in a report after Thursday’s announcement.

TSMC sees zero growth in the global semiconductor industry this year after
previously expecting a 3 percent increase, co-Chief Executive Officer Mark Liu said Thursday. Global market revenue for smartphones will climb 10 percent this year while that for PCs will drop 6 percent, he said. TSMC’s full-year revenue growth will reach 10 percent, he said.

“Due to a weaker global economy, a stronger U.S. dollar environment and a volatile financial market, the electronic device market has been negatively impacted, resulting in a lack of growth,” Liu said. “We see the unexpected slowdown of the economy in China since Q1, resulting in a continued sluggish smartphone demand economy.”

In July, TSMC estimated its annual capital spending at $10.5 billion to $11 billion, saying the figure may be adjusted in the future. Spending for the year through September was $5.5 billion, it said Thursday.

Ho cited efficiency gains, adjustments in capital deployment and changes to foreign-exchange rates for lowering the spending plan.

TSMC on Thursday narrowed its sales forecast for this quarter, predicting revenue of NT$201 billion to NT$204 billion. Analysts had expected NT$206.7 billion.

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