TSMC follows Intel with profit plummet

World's largest contract chip manufacturer also reports that sales were down 31 percent in the fourth quarter.

Brooke Crothers Former CNET contributor
Brooke Crothers writes about mobile computer systems, including laptops, tablets, smartphones: how they define the computing experience and the hardware that makes them tick. He has served as an editor at large at CNET News and a contributing reporter to The New York Times' Bits and Technology sections. His interest in things small began when living in Tokyo in a very small apartment for a very long time.
Brooke Crothers
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Updated at 10:50 a.m. PST throughout.

Taiwan Semiconductor Manufacturing Co. posted a sharp profit decline of 64 percent on Thursday. This comes after Intel posted a steep dive in profits last week.

TSMC, the world's largest contract chip manufacturer, said its sales sunk to 64.6 billion Taiwan dollars ($1.96 billion) in the fourth quarter of 2008, down 31 percent from the same period last year as well as from the previous quarter.

Net income was NT$12.6 billion in the fourth quarter, down nearly 64 percent from the year-earlier period and 59 percent from the previous quarter. Gross margin, a crucial indicator, was 31.3 percent, down 16.5 percent.

TSMC makes chips for Advanced Micro Devices, Texas Instruments, Nvidia, and Qualcomm, among many other top-tier chip suppliers.

"The global economic recession continues to worsen," said Lora Ho, chief financial officer of TSMC, in a statement. "Customers...continue to pare their inventories aggressively, resulting in a further significant cut back of wafer demand," Ho said.

TSMC CEO Rick Tsai, however, said he is seeing some signs of a bottoming out. "There is some indication that we may be bottoming out in the first quarter (of 2009). The numbers are still not good. I do not want to mislead you. But we believe we are seeing a bottom. But we will need more time and data to confirm this observation," he said.

TSMC expects gross margin to be between one percent and five percent and operating profit margin to decrease between 15 percent and 19 percent in the first quarter and revenue is projected to be between NT$32 billion and NT$35 billion.