TSMC Says 2Q in Line or Better After Major Customer Falls

Taiwan Semiconductor Manufacturing (TSMC) said its second quarter revenue, gross profit margin and operating profit margin are all in line with or a bit better than its previous guidance after major customer Nvidia reduced its own revenue forecast.

TSMC's third quarter revenue is expected to grow compared to the second quarter, while its gross profit margin and operating profit margin will remain at the same levels, the company said in a filing to the Taiwan Stock Exchange late Thursday.

A day earlier, graphics chip maker Nvidia reduced its revenue forecast for the current quarter to between US$850 million to $950 million from previous guidance of $1.1 billion and said its gross margin would decline. The company blamed weak end-market demand, a delayed ramp of new products and price competition for the reduction.

Nvidia also said it planned to take a $150 million to $200 million charge against revenue related to a product glitch.

The company's stock was hammered in U.S. trading on Thursday, plunging 30.7 percent to end the day at US$12.49 per share during normal hours on the Nasdaq stock market.

Nvidia is one of TSMC's largest customers. TSMC, the world's largest contract chip maker, manufactures chips on behalf of Nvidia, which specializes in chip design and development.

TSMC's stock fell 4.9 percent to end Thursday trade at NT$58.8 (US$1.94) on the Taiwan Stock Exchange.

Nvidia chip products go into a range of devices, including game consoles, mobile phones and laptop and desktop computers.

John Pitzer, chip industry analyst at investment bank Credit Suisse, said Nvidia's problems have been caused by market share losses to Advanced Micro Device's (AMD) ATI graphics lines. Nvidia is also missing out because it doesn't have enough sales to the fastest growing segments of the PC industry, low-end laptops and servers, he wrote in a research note.