Business / Companies

Slowing smartphone demand hits TSMC hard

(Agencies) Updated: 2016-04-15 09:36

Taiwan Semiconductor Manufacturing Co posted its third straight quarterly earnings fall as decelerating smartphone demand eroded its bottom line and a February earthquake held up production.

The world's largest contract maker of microchips reported an 18 percent fall in first-quarter net income to NT$64.8 billion ($2 billion), compared with the NT$65.8 billion that analysts expected on average. The February temblor in southern Taiwan had prompted the company to cut margin forecasts that month.

TSMC, which competes with Samsung Electronics Co to make processors for Apple Inc, is grappling with the most pronounced slowdown in global mobile demand on record.

The iPhone maker has predicted its first revenue decline in more than a decade and worldwide smartphone sales in 2016 are expected to rise by a single-digit percentage for the first time, according to Gartner Inc.

That deteriorating outlook, coupled with a volatile global economy and a persistently depressed personal computer market, prompted Chairman Morris Chang in January to forecast a second straight quarterly sales drop.

To offset the market decline, TSMC is shifting toward more advanced, higher-margin 16-nanometer chip manufacturing.

That gives it an edge against rivals such as Semiconductor Manufacturing International Corp.

"February sales missed our expectation due to earthquake damage," Ethan Chen, an analyst with Sinopac Financial Holdings, wrote before the earnings were released. That impact was exacerbated by a relatively long Spring Festival break, he said.

TSMC had previously reported an 8.3 percent slide in first-quarter sales to NT$203.5 billion, marginally beating estimates for NT$201.1 billion. Its shares ended Thursday unchanged. The stock has gained 13 percent this year.

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