TAIPEI, April 10 Sales at Taiwan's contract chipmakers grew in the first three months of this year, though destocking by customers was less rapid than had been forecast.
January-March sales at Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and United Microelectronics Corp were up from both the previous quarter and the same period in 2012, as demand for hi-tech chips used in smartphones and tablets continued to grow.
TSMC, the world's top contract chipmaker, supplies Qualcomm Inc, Texas Instruments Inc and Nvidia Corp . Smaller rival UMC also makes chips for Texas Instruments.
In turn, these firms sell chips to comsumer electronics companies like Apple Inc, Samsung Electronics and HTC Corp.
"Inventory correction in the first quarter was not as serious as the market expected, so restocking in the second-quarter will not be as strong," said KGI Securities analyst Ricky Liu, who forecast TSMC's second-quarter sales growth at 6-8 percent, compared with a consensus forecast of 10-15 percent given by analysts in the fourth quarter.
TSMC Chairman Morris Chang has said he expects a rebound in revenue from April, and has predicted full-year revenue growth of 15-20 percent.
TSMC said sales in the first quarter were T$132.7 billion ($4.42 billion), beating the T$127-T$129 billion guidance the company gave in January.
The figure was slightly higher than the T$131.3 billion recorded in the fourth quarter of last year, and 25.7 percent higher than in the first quarter of 2012.
During the same period, UMC posted a 6.5 percent rise compared with the previous quarter.
TSMC and UMC will announce first-quarter earnings on April 18 and May 8 respectively.
Though demand is strong, earnings at contract chipmakers including non-Taiwanese rivals Samsung and GlobalFoundries Singapore Pte Ltd tend to be limited by heavy spending as competition intensifies.
"Higher costs will offset revenue growth and cap margin expansion," said Warren Lau, an analyst of Kim Eng Securities based in Hong Kong, in a report.
"Because of the heavy investment in capital expenditure, depreciation costs are projected to increase by 20-25 percent YoY in 2013, accounting for at least 25-26 percent of revenue."
Shares of TSMC are up 1.3 percent since the beginning of the year, while shares of UMC have slipped 6 percent. The broader Taiwanese market has risen 1 percent.