The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing - Jeane Baptiste Colbert
CHINESE CHIP FOUNDRY Taiwan Semiconductor Manufacturing Company (TSMC) has reported a drop in profits, citing lower demand for chip fabrication.
TSMC, known for its long standing relationships with graphics chip designer Nvidia and AMD's graphics division among others, announced revenue of NT$110.51bn with net income of NT$35.95bn for its first fiscal quarter of 2011 ended 30 June. Although year-on-year revenue increased by 5.3 per cent, profit dropped by 10.8 per cent. Due to currency fluctuations TSMC was able to say that in US dollars its second quarter revenue increased by 16 per cent from last year.
Since TSMC fabs chips for many designers its revenue is an indicator of global chip demand. Both AMD and Intel cited weaker demand for their chips and TSMC's similar explanation for its lacklustre performance suggests that it isn't just x86 chips that are facing lack of demand.
TSMC's headline 40nm process node accounted for 26 per cent of its wafer revenue while its well established 65nm process node made up 32.5 per cent. There has been long running speculation as to whether the firm will produce a 22nm process node, with 20nm being the most likely outcome. The success of that process node is absolutely critical for TSMC as 40nm is starting to look decidedly old hat for some of its customers.
Lora Ho, SVP and CFO of TSMC said, "The outlook of the global economic condition has weakened in the last few months, which has added volatility to the supply chain inventory, and in turn, has significantly impacted the demand for our wafers in the third quarter of 2011."
Ho was fairly blunt when it came to predicting the future, projecting a small decline in revenue from TSMC's second fiscal quarter and more worryingly drops in gross and operating profit margins. Ho added, "Relative to the second quarter, the computer and consumer segments will decline more than the decline of the communications segment while [the] industrial/standard segment will increase."
There's little doubt that 2011 has so far been a tough time for chip vendors. While smartphone and tablet chip sales might be going through the roof, as signified by ARM's bumper financials, the rest of the industry is having to cope with lower demand for PCs. µ