Taiwan Semiconductor Manufacturing Co. Ltd., the world’s biggest contract manufacturer of wafers for chip vendors, is warning that its fourth quarter sales will be negatively impacted by a softening in demand for “certain high-end” smartphones. The foundry giant did not provide details about the devices or the manufacturers.
In a statement reporting its third quarter financial results, TSMC said it expects OEMs in the mobile devices market to implement an inventory correction program that could hurt its sales during the ongoing quarter.
“While we continue to make strides in technology progression, we expect our fourth quarter to be impacted by softer demand for certain high-end mobile devices and the inventory correction resulting from such softer demand,” said Lora Ho, CFO of TSMC, in the statement.
TSMC makes semiconductor wafers for many of the industry’s leading chip vendors as well as OEMs that provide their own design specifications. While sales of some mobile equipment OEMs have soared, many others are struggling with tepid demand, including Nokia and HTC. Even Apple Inc. has reportedly cut component orders for its newly-introduced iPhone 5c due to “tepid” demand for the product, according to a Wall Street Journal report. (See: Apple’s Dual iPhone Strategy in Doubt).
While TSMC did not specifically mention smartphones in its statement, it is generally assumed that this is one of two families of “mobile devices”– the second being tablet PCs – that has enough large volume to negatively impact orders if customers reduce component demand at the foundry. TSMC said it expects sales in the fourth quarter would be between NT$144 billion ($4.9 billion) and NT$147 billion, with gross profit margin in the range of 44 percent to 46 percent, down from the 48.5 percent it recorded in the September quarter. The company also expects operating margin to slip several percentage points to between 32 percent and 34 percent, compared with 36.7 percent in the just-ended quarter.
In the third quarter, TSMC reported net income rose 5.2 percent, to NT$51.95 billion from NT$49.38 billion, while sales increased almost 15 percent, to NT$162.6 billion from NT$141.5 billion, in the comparable quarter of 2012. (See: TSMC Q3 Sales Rise 15%, Profit up 5%).