TSMC reports weak Q4 as tech demand slips

TSMC, the world's largest contract chip maker, reported weak fourth-quarter earnings and forecast worse times ahead.

Taiwan Semiconductor Manufacturing (TSMC), the world's largest contract chip maker, said the deepening global economic recession hurt its fourth-quarter results. It predicted its sales in the first quarter could be cut in half.

The company, which manufactures chips on behalf of its clients, said consolidated sales dropped 31 percent to NT$64.56 billion (US$1.92 billion as of Dec. 31, 2008, the last day of the period reported), while net profit sank 64 percent to NT$12.45 billion.

Demand for digital products in the fourth quarter was worse than expected and consumer demand remains weak, TSMC said. The consequence for TSMC has been a "significant" reduction in demand.

Sales in the first quarter will likely fall to between NT$32 billion and NT$35 billion, TSMC said, well below the NT$87.48 billion in sales the company reported in the first quarter last year. The last time TSMC's sales were near the range forecast was in 2001, when the global technology industry hit the skids after the dot-com bubble burst.

TSMC said its gross profit margin will fall to between 1 percent and 5 percent, compared to 31.3 percent in the fourth quarter.

TSMC's quarterly earnings reports are watched carefully for signs of rising or falling demand because the company manufactures such a wide variety of chips for so many end products.

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