SAN FRANCISCO—Chip foundry Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) reported record third quarter sales and profit Thursday (Oct. 25), surprising analysts who have watched other chip firms turn in disappointing results in recent days.
But TSMC also warned that it expects sales to decline in the fourth quarter as the IC supply chain burns off excess inventory.
[Get a 10% discount on ARM TechCon 2012 conference passes by using promo code EDIT. Click here to learn about the show and register.]
Morris Chang, TSMC's chairman and CEO, said the strength of demand for mobile products led the company to report higher-than-expected third quarter results and provide a better-than-expected fourth quarter sales target.
"Mobile IC demand is indeed very strong, stronger than we expected even three months ago," Chang said. He described TSMC as a technology leader in mobile ICs and said the firm expects mobile products to fuel TSMC's growth for several years.
"This is a leadership that we and our partners will continue," Chang said.
TSMC (Hsinchu, Taiwan) reported sales of NT$141.38 billion (about $4.84 billion), up 10 percent from the previous quarter and up 33 percent from the third quarter of 2011. The company reported a net income of NT$49.30 billion (about $1.67 billion), up 18 percent sequentially and 62 percent year-over-year.
Consensus analysts' expectations had called for TSMC to report third quarter sales of about $4.74 billion, according to Yahoo Finance.
For the fourth quarter, TSMC said it expects sales to decline about 8 percent sequentially to between $4.41 billion $4.48 billion as the IC supply chain begins reducing inventories. The fourth quarter target also came in ahead of consensus analysts' expectations.
"We also think that this will be followed by another modest dip in the first quarter and we expect a rebound in the second quarter," Chang said. Days of inventory is currently 13 days above the seasonal average, Chang said. The company expects it to adjust to seven days above the seasonal average by the end of the year.