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Taiwan Semiconductor Manufacturing Co, the world's largest contract chipmaker, announced a 9.2 per cent increase in net profit in the three months to the end of June from the first quarter, and forecast its recovery would continue into the third quarter.

The company said chip demand for communications and consumer electronics was driving growth.

“Due primarily to demand recovery from our customers, our second-quarter business had improved better than we guided previously,” said Lora Ho, TSMC's chief financial officer. “We expect the recovery to continue for the coming quarter.”

The company reported net revenues of NT$58.5bn ($1.8bn) in the second quarter, up 5.1 per cent fromthe first quarter but down 9.8 per cent from the same period last year. Net profit rose to NT$18.37bn, up9.2 per cent from the previous quarter but still 21.5 per cent lower than the second quarter last year.

Ms Ho said the company expected shipments to increase by between 14 per cent and 16 per cent in the third quarter, after rising 14.5 per cent in the second. She forecast the utilisation rate to rise to 90 per cent from 85 per cent, and for the gross profit margin to improve despite a continuing fall in the average selling price.

Rick Tsai, CEO, said he was now more optimistic about the semiconductor industry this year, which he forecast would grow between 4 per cent and 5 per cent, because of steady global economic growth.

Mr Tsai said that although the foundry sector probably would not grow as quickly as the wider semiconductor industry, he was optimistic about 90 nanometre manufacturing technology.

He said the new technology was already contributing 2 per cent of revenues, a figure he said would rise to 10 per cent in the third quarter and “well above” that in the fourth.

“We are very confident 90 nanometre will go over very well this year and next,”Mr Tsai said.

Analysts said there were few surprises in the results, although they expressedconcern about the declinein the average sellingprice.

Murat Atamer, an analyst at Primasia Securities, said that despite TSMC's upbeat forecasts, there was not much upside left in the company's share price, which has risen nearly 28 per cent since the start of November last year.

Copyright The Financial Times Limited 2017. All rights reserved.
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