Taiwan Semiconductor Manufacturing Co. saw net profit for the third quarter rise 5% year on year as revenue hit a record, but the chip maker warned that this could slip later in the year due to a slowdown in demand for high-end smartphones.
Net profit totaled NT$52 billion (US$1.8 billion), up from the NT$49.4 billion in the same period last year, TSMC reported on Thursday. Revenue came in at NT$162.6 billion, a year-over-year increase of 14.9%.
TSMC has continually reported strong earnings from its contract chip manufacturing business, which builds mobile processors for vendors including Qualcomm and Nvidia. The company estimates about a third of its revenue comes from chips for smartphones and tablets.
The company's 28-nanometer chip manufacturing process, used to build faster and more power-efficient processors, generated 32% of revenue in third quarter, the largest sales driver of any of the company's manufacturing processes.
But TSMC expects soft demand for high-end smartphones in the fourth quarter will put a damper on its own revenues in the period, CEO Morris Chang said during a conference call to discuss earnings. "We believe this decline is short term," he said, adding that handset vendors need time to clear out their existing inventories.
He expects a quarter-on-quarter decline in fourth-quarter revenue to between NT$144 billion and NT$147 billion.
However, TSMC remains optimistic about its chip business. In the first quarter the company will begin volume manufacturing of chips using its new 20-nanometer process, which can offer 30% higher chip speeds over its 28-nanometer technology.
At the same time, demand for tablets and smartphones will continue to grow, and the need for mobile chips could extend to wearable devices such as smartwatches, Chang said.
The 82-year-old Chang said Thursday that he will step down from his position as company CEO, but plans to remain on as a "hands-on" chairman. TSMC will name a new CEO or co-CEOs by next June.