Taiwan Semiconductor Manufacturing Co (TSMC) announced it will cut its capex budget this year by $1 billion due to falling demand for smartphone chips.
The news comes just a day after the chipmaker reported its net profit in Q1 fell 1.2 per cent from a record profit of TWD80 billion ($2.55 billion) in Q4, but was 65 per cent higher than a year ago. Q1 revenue jumped almost 50 per cent year-on-year to TWD222 billion.
The world’s largest contract chip manufacturer said its capex will drop to $11 billion from its previous forecast of $12 billion, the Taipei Times reported.
US-based Intel earlier in the week slashed its capex budget 13 per cent to $8.7 billion.
The Hsinchu-based firm said the reduction was due to it being able to increase its capital efficiency, the faster migration to advanced 16nm chips from 20nm chips and slowing demand, the Times said.
A Credit Suisse analyst noted that the large cut likely means Qualcomm, one of TSMC’s largest customers, has faced declining orders. Samsung has opted to use its own Exynos processors in the Galaxy S6 in place of Qualcomm chips and also reported replacing the US company as its modem supplier.
TSMC has cut its revenue growth outlook for the global semiconductor industry for 2015 from 5 per cent to 4 per cent and reduced its growth forecast for global foundry revenues to 10 per cent from 12 per cent.
The company has forecast double-digit revenue growth this year, but said Q2 revenue is expected to fall 7-8 per cent due to what it claimed was an “inventory correction” on the client side.
The lower than expected demand for handset chips, according a TSMC representative, is expected to reduce its 0.28nm capacity utilisation rate to about 80 per cent this quarter. This means 20nm chips — used mostly for high-end smartphones — would contribute just 15 per cent of its overall revenue, instead of the previous forecast of 20 per cent, the Times said.
The slowdown is expected to be short-lived, with demand recovering in the second half after inventories return to normal levels, the company said.