TSMC records 12% quarterly drop in Q1 net profit (update)

Taipei--Taiwan Semiconductor Manufacturing Co. (TSMC, ???), the world's largest contract chip maker, on Thursday reported a quarterly drop of more than 12 percent in its first-quarter profits, citing the slow season effects.

The decline was also due to appreciation of the Taiwan dollar, which rose more than 6 percent against the U.S. dollar in the first three months of the year, said TSMC, which fell short of its first-quarter sales target.

TSMC posted NT$87.63 billion (US$2.89 billion) in net profit for the period January to March, a quarterly drop of 12.5 percent. Its consolidated sales dropped 10.8 percent from the previous quarter to NT$233.91 billion, falling short of its forecast NT$236 billion to NT$239 billion.

The company reported first-quarter earnings per share of NT$3.38, compared with NT$3.86 in the fourth quarter of last year.

However, TSMC's first-quarter net profit was a 35.3 percent year-on-year increase, while its EPS was also higher than the NT$2.50 posted in the same period of last year.

TSMC Senior Vice President and Chief Financial Officer Lora Ho (???) said that a higher Taiwan dollar impacted not only the chip maker's sales for the first quarter but also its gross margin and operating margin in the three-month period.

During the January-March period, TSMC's gross margin fell to 51.9 percent, down 0.4 percentage points from a quarter earlier, while its operating margin dropped to 40.8 percent from 41.9 percent recorded in the previous quarter. The latest gross margin and operating margin was in line with market expectations.

In an investor conference, Ho said that market demand for the second quarter is expected to be weaker than in the first quarter due to continued slow season effects that will make inventory adjustments continue in the supply chain of the global semiconductor industry.

As a result, Ho said, sales for the April-June period are expected to range between NT$213 billion and NT$216 billion, down 8 percent-9 percent from the first quarter, with gross margin and operating margin expected to range between 50.5 percent-52.5 percent and 39 percent-41 percent, respectively.

However, Mark Liu (???), TSMC president and co-chief executive officer, said in the investor conference that his company's operations are expected to make a strong comeback in the third quarter, a traditional peak season.

Liu said that TSMC's sales for the entire 2017 are likely to grow 5 percent-10 percent from a year earlier in U.S. dollar terms.

Nevertheless, Liu said that TSMC has lowered its forecast for sales growth in the global pure wafer industry to 5 percent from an earlier estimate of a 7 percent increase, taking into account the continued inventory adjustments. Liu emphasized that TSMC could still outperform the global pure foundry industry as well as the entire semiconductor sector.

He said that TSMC has raised its forecast for sales growth of the entire global semiconductor industry to 7 percent from an early prediction of a 4 percent rise on the back of stronger demand for memory chips.

Source: Focus Taiwan News Channel