Taiwan Semiconductor Manufacturing Company, the world’s biggest contract chip maker by revenue, said it expects a strong recovery in demand for PC-related chips in the first quarter, as the industry’s global supply chain restocks depleted inventory.
Lora Ho, chief financial officer, said on Wednesday that the company expects a double-digit increase in demand for chips used in computers and consumer electronics over the next three month. TSMC is widely seen as a bellwether for the technology industry because of the breadth of its client base and its dominant market share in contract chipmaking.
The increase is partly because of robust US retail sales over the holiday season, leading to a need to restock supply chain inventory that has been depleted following supply disruptions caused by Japan’s earthquake and Thai floods. As a result, TSMC expects overall first-quarter revenues to be flat compared to the fourth quarter at between T$103bn to T$105bn, despite seasonal factors that in past year normally lead to lower revenues in the first three months of the year.
TSMC is the first major technology company to sound an upbeat tone for the PC industry in the first quarter. Intel, the world’s biggest chipmaker, last month lowered forecasts for the fourth quarter as a result of a shortage in hard disc supplies after the Thai floods, and said the impact was expected to continue into the first quarter.
Both Intel and Microsoft, the world’s biggest software company, will report quarterly results on Thursday.
But despite TSMC’s positive outlook for the first quarter, Morris Chang, its chief executive, said the restocking does not reflect a broader recovery in demand in major markets, and warns that the rest of this year remains challenging. “I don’t think the US will do too badly this year … but I think Japan and Europe will both underperform the US,” he said.
IHS, the research firm, forecasts worldwide PC shipment to fall by 3.8m to 84.2m. In the first quarter.
TSMC on Wednesday lowered its growth forecast for the overall chip industry to 2 per cent this year, versus an earlier forecast of 3 to 5 per cent, and cut its capital expenditure plans by 18 per cent to $6bn to scale back capacity expansion because of lowered growth forecasts
Over much of last year, TSMC saw its profits squeezed as it boosted investment in research and new capacity, while demand fell short of expectations because of the economic crises in Europe and the US.
In 2011, TSMC’s revenues rose by 2 per cent, to $14.5bn. Net profits fell 17 per cent to $4.6bn, the company said on Wednesday.
Mr Chang remained confident, however, that TSMC’s lead in technology will help it maintain its dominant position despite increasing competition from Abu Dhabi-backed GlobalFoundries, which is expected to begin mass production at its new plant in New York State this summer, and from Samsung, which Mr Chang described as “a fearsome competitor who is certainly trying very hard to break into the contract chipmaking business”.