Taiwan's TSMC Q1 profit up 65%, but warns of slowdown

Taiwan Semiconductor Manufacturing Co said Thursday its first quarter net profit surged 65 percent year-on-year to Tw$79 billion ($2.53 billion), boosted by demand for Apple's iPhones. The world's biggest contract microchip maker by revenue said chips for communication including smartphones accounted for 60 percent of its revenue. But it forecast a slowdown in the coming months as it faces increased competition from South Korea's Samsung and a slowdown in the vast China market. Samsung has been reported to be supplying Apple with chips for its next-generation iPhone, the 6S. Despite the year-on-year profit rise -- which was in line with expectations -- the company said net profit in the three months to March fell 1.2 percent from the previous quarter. Revenue came in at Tw$222 billion for the first quarter, a rise of 49.8 percent year-on-year, but a drop of 0.2 percent from the previous quarter. Even demand for communication chips dropped nine percent on-quarter. Chief financial officer Lora Ho said demand "remained strong", but would be dented in the next three months. "In the second quarter, a combination of customers' business loss, inventory adjustment, and a less favourable exchange rate will negatively impact our business," she said. Revenue in the second quarter is forecast at Tw$204 billion-Tw$207 billion, 6.7 percent lower than January-March. George Chang of Yuanta Investment Consulting said the company's performance had been "in line with its guidance", but there were challenges ahead. "People are worrying about the slowing demands of China for smartphones and stiff competition with Samsung for orders from Apple," he told AFP. "Another concern is if its major clients like (chip design houses) Qualcomm and MediaTek cut back on their orders to TSMC due to slowing demand." TSMC announced the hiring of 2,200 engineers late last year to keep pace with expansion, which Taiwanese media attributed to rising demand from clients including Apple and US-based Qualcomm. The company remains tight-lipped about its clients, refusing to officially confirm that it is an Apple chip supplier.