Financial Crisis - TSMC Still Invests

EE Times reports that despite the economic downturn and the severe effect of the financial crisis on the high tech industry, TSMC is continuing to invest for the future while remaining cautious about the presence.

Amid one of the toughest periods in its illustrious history, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) remains cautiously optimistic about the IC industry and vowed that it will continue to invest in R&D despite the downturn.

TSMC (Hsinchu, Taiwan) plans to hire more engineers. The world's largest foundry provider also reiterated plans to equip and ramp up its 40-nm fab lines this year. It is readying new and separate 3-D and CMOS image sensor technologies. And it is also planning to move the IC-equipment in its R&D fab for the 22-nm node.

Rick Tsai, president and chief executive of TSMC, reiterated industry reports that the silicon foundry giant is seeing new order activity, but he also warned that there are still challenges ahead in the market.

Among those challenges include the overall economy, product demand and margin pressures. "This recession is bad," Tsai said at TSMC's Technology Symposium here. "This is a difficult time for all of us."

Indeed, it has been a humbling time for TSMC. After strong growth in the first three quarters of 2008, TSMC's business fell off the cliff in the fourth quarter of last year.

As a result, the company is expected to report a loss in Q1. It also recently cut about 200 jobs, implemented furloughs and slowed its wafer starts.

Now, there are some positive signs for the company and the overall industry. Inventories are low. Activity in China is picking up. "We are seeing what we call rush orders," Tsai said.

Still, the overall IC market is expected to fall in 2009. "We will see a dip in 2009," he said. "We will see moderate growth in 2010." [...More]

We have argued more times than not in this blog that despite the economic downturn, companies must continue to invest in their future and develop strategic plans that will pull ready them for when the slump is over.

Financial Crisis Pounds Companies

Is there any good news out there? More depressing news about the state of Taiwan tech sector and economy in general. The China Post reports top Taiwanese companies are embarking on strict belt tightening measures including forced unpaid leave one day a week. According to the China Post:

TAIPEI, Taiwan -- An increasing number of leading local enterprises, including Formosa Plastics Group (FPG) and high-tech Taiwan Semiconductor Manufacturing Co., have resorted to severe belt-tightening measures to tide over the sharp business decline, according to industry sources.

Confronted with sharp business shrinkage, Formosa Plastics Group (FPG), Taiwan’s largest business conglomerate, has decided to reduce capital outlays for 2009 and have started to carry out de facto pay cuts.

FPG, under the instruction from its chief executive officer (CEO) Wang Wen-yuan, will slash capital outlays for the petrochemical sector by 30%, amounting to several tens of billions of NT dollars, including NT$30 billion of reduction for Formosa Plastics Corp., the flagship firm of the group, alone.

In addition, FPG is studying whether to expand the implementation of de facto pay cut, in the form of mandatory unpaid leave, inside the group. Presently, the employees of Nan Ya Technologies and Inotera Memories, the group’s two subsidiary DRAM (dynamic random access memory) makers, are already to take one day of mandatory unpaid leave after every five working days. This is the first time for the group to carry out the practice since 25 years ago, when it also embraced a similar measure amid the global oil crisis.

Meanwhile, the TSMC, the world’s leading IC foundry, announced on Wednesday the implementation of four days of mandatory unpaid leave per month, in addition to elimination of managerial allowances. This is deemed tantamount to a 15 percent pay cut for all employees.

In the mean time Computer World reports research firm IDC predicts a few small PC manufacturers will disapper. According to Computer World:

(Computerworld) With credit in a tight squeeze and the economy in free fall, the next few years should see the collapse of some small PC makers and a restructuring of the rest of the industry, according to an industry research firm.

Richard Shim, personal computing research manager at IDC, told Computerworld that he expects a consolidation of the market. However, he doesn't think that the big PC players, like Hewlett-Packard Co., Dell Inc. and Acer Inc., will gobble up smaller hardware vendors. Instead, he said those smaller players will simply fold up shop as the faltering economy keeps companies and individuals from buying new computers.

"It won't be so much about acquisition but the smaller players will just go away," said Shim, adding that he thinks the industry could lose fewer than 10 companies. "The big players are feeling the hurt as well. Right now, everybody is beating each other up in price. If some are going to die off anyway, what's the sense in buying them?"

Another company slashing forecasts is Mediatek, the largest mobile phone chipset maker in Taiwain. According to the Taipei Times:

In its filing to the stock exchange yesterday, MediaTek said revenue may plunge by more than 30 percent this quarter from NT$28.05 billion in the third quarter, rather than a decrease of between 9 percent and 16 percent estimated in October.

“The global financial storm has started to impact on demand in the emerging markets. End demand for all products is lower than expected,” the Hsinchu-based firm said in the filing.

The DRAM industry however is receiving some help from the local government. Although the government probably won't bail out all the DRAM companies, they are looking at ways to help the sector as a whole. According to the IT Examiner:

The Council of Economic Planning and Development (CEPD) now plans to actively promote a consolidation intitative for the ailing industry. According to CEPD chairman Chen Tain-jy, the government will also grant financial aid to manufacturers capable of developing indigenous and competitive technology.

"The plight of the DRAM industry is very much known to the government and we are taking effective measures to help. We will be very careful about doing the kind of capital injection the US is doing," explained Taiwan President Ma Ying-jeou.

Ma also acknowledged the importance of the DRAM industry in Tawian.

"Their (manufacturers) fall would not only affect the IT industry but also our banking system as well. We understand that very well. The premier and even the vice president, Vincent Siew, are involved in trying to figure out a plan for their survival," said Ma.

There is a lot of other bad news out there. Foxconn will reporterdly lay off as much as 40,000 people in China and other companies in Taiwan are laying off a significant amount of their work force. It is sad that there is nothing these companies can actually do to help themselves. Taiwan's tech sector is export dependent with most of their money coming from sales in the US, China, Japan and Europe. With the US, Japan and Europe in (or almost in) a recession, and slowing growth in China, the tech sector here wills struggle to kick itself out. All they can do is cut costs, improve efficiencies, cut back on excessive CAPEX and continue to develop and consolidate their competitive advantage. If they do this, when the slump is over they will be ready for the new fight.

Once again I believe the world economic order will be drastically readjusted after this crisis comes to pass and I am very interested to see how it affects the tech sector in Taiwan. Of course I have many friends working in and around this industry in Taiwan and so I am hoping for their sake and the sake of Taiwan's economy these companies can survive and endure. But the short-mid term will be tough.

The China Post: Top businesses adopt belt-tightening measures
Computer World: IDC: Economic crisis will kill off some PC makers
Taipei Times: MediaTek slashes fourth-quarter sales estimatesMediaTek slashes fourth-quarter sales estimates
IT Examiner: Taiwan nixes wide-scale DRAM bailout

Financial Crisis Affects Semiconductor Industry

Yesterday in Financial Crisis Pushing Taiwan's Tech Sector Down we noted how the financial crisis is affecting Taiwan's tech sector. Of course the financial crisis is not only wreaking havoc with the tech sector in Taiwan but with the global hi-tech value chain. Yesterday Reuters noted the president of SEMI as saying there will be a significant decline in global sales of semiconductor equipment. According to Reuters:

Global sales of semiconductor equipment are expected to fall 28 percent to $30.9 billion this year as deteriorating world economies prolong a slump in the chip sector, industry association SEMI said on Tuesday.

SEMI said sales had declined to levels last seen in 2003. Earlier this month, it said North American chip-equipment orders fell 28 percent in October, while in Japan they plunged 68 percent as chipmakers slashed or even froze spending.

"We anticipate a second year of double-digit decline in 2009," SEMI's President and Chief Executive Stanley T. Myers said in a statement.

SEMI said it expected a 21 percent decline in 2009 followed by 31 percent growth in 2010, although it was relying on history repeating itself as it had little else to go on.

"Impaired or non-existent business trend visibility is pervasive amidst the deteriorating global economy. Therefore our outlook for 2010 is based on patterns of previous industry recoveries," Myers said.

In related news, yesterday Kaohsiung based Applied Semiconductor Engineering (ASE), the world's largest chip packager, has cut is Q4 revenue outlook by between 25% and 28%. According to the Taipei Times:

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s biggest chip packager, yesterday slashed its fourth-quarter target, blaming accelerating contraction in demand amid a global economic slowdown.

ASE said fourth-quarter revenue could decline by between 25 percent and 28 percent quarter-on-quarter, rather than its forecast of a drop of between 15 percent and 20 percent a month ago, following in the steps of semiconductor heavyweight Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which recently trimmed its outlook.“As end demand is shrinking faster amid deteriorating global economic prospects, the company’s fourth-quarter revenues will be lower than the forecast it made on Oct. 31,” ASE said in a filing to the Taiwan Stock Exchange.

The current financial crisis and associated slowing of demand and in the semiconductor industry is continuing to wreak havoc with the entire hi-tech value chain.

Reuters: Chip equipment sales seen down 28 pct in 2008-SEMI
Taipei Times: ASE cuts fourth-quarter sales forecast

Financial Crisis Pushing Taiwan's Tech Sector Down

Well the Dow Jones plummeted 7% yesterday. Did anybody expect anything better? I didn't and I am not holding my breath either. How is Taiwan doing? As I said yesterday I had dropped out of the loop for a little. While I have been away Foxconn has decided to layoff 1,500 workers in Hungary, more than half of their workforce in that country (Reuters article).

On the foundry side, both TSMC and UMC are looking to cut costs by as much as 20%. UMC are forcing employees to take one day a week of unpaid leave. TSMC is apparently looking to initiate a series of layoffs and also ask some employees to take a unpaid vacations (Softpedia article). The Guardian also reports TSMC has "slashed its fourth-quarter consolidated sales forecast to between T$63 billion ($1.9 billion) and T$65 billion from a previous forecast of T$69 billion to T$71 billion made in late October." (Guardian article)

Digitimes reports: "Due to falling demand of white-box handsets in China, market observers have lowered the expectations of MediaTek's November sales from NT$7.5 billion (US$225 million) to NT$7 billion. China handset customers cut orders unexpectedly in the second half of November, crippling MediaTek's sales last month, the company indicated." (Digitime article)

In the personal computing arena, a JP Morgan analyst said on Business Week PC sales are expected to decline by 5% over the next year. He also expects the average selling price of PC's to decline over the same period adding further pressure to the industry (Business Week article). Since some of the biggest PC companies are in Taiwan (ACER and ASUS), some of the biggest contract manufacturers for notebooks (Quanta, Compal, Inventec) and some of the biggest EMS/contract manufacturers are Taiwanese (Hon Hai), any decrease in the PC demand and any weakening in the PC supply chain will have a negative impact on the Taiwanese economy.

I must admit with every new news report I am increasingly pessimistic about the short-to-medium term future. A lot of companies are suffering now and even if they may survive the current crisis, they may have to spend a long time rebuilding their competitive advantage. However, the most compelling question is once this crisis is over, what will the new world order be? Things will change. Will countries like Taiwan start to realize that depending so heavily on a single market is fraught with danger and a diversified customer base reduces risk inherent in a single market? If they do wish to diversify what other markets are open to them? How can they penetrate those markets? Are those markets sustainable in and of themself? Are the risks of investing in those markets and building those markets lesser or greater than the current economic risk currently in the states?

The biggest sadness is the effect this is having on the average person in the street. I myself hope the companies can recover and jobs made available to many people. But until companies can justify the staff expenditure they will probably not be willing to hire new people and will more likely get rid of staff.

As I said, the short term future is a little scary.

Click Focuses on Taiwan

The BBC technology program Click this week focused on the Taiwan computer industry. The writeup on the BBC pages says:

Spencer Kelly visits Taiwan to see how the country's manufacturers are thriving in the global consumer electronics market.

Sitting just off China's east coast, Taiwan has long been overshadowed by its big brother in the manufacturing game.

While China is on its way to becoming the planet's biggest economy, Taiwan is considered the technological workshop of South East Asia.

Already 90% of the world's laptops are produced in Taiwan, along with vast quantities of electronics from motherboards to mobile phones.

But Taiwanese companies have started to realise the favourable commercial conditions offered by its neighbour.

Some have moved their manufacturing to China, where enormous quantities of goods can be produced at bargain basement prices.

"Thirty to forty years ago Taiwan was manufacturing for USA and Japanese companies," said Jonathan Tsang, the chairman of Asus. "But now because the living standard is already high, the manufacturing cannot compete with China, so the manufacturing has been moved to China."

I did find the highlighted phrase above amusing. Taiwan has not STARTED to realize, they realized this many many many years ago. They are among the biggest investors in China and have been heavily involved in manufacturing in China for a long time. There are laws which prohibit the migration of certain technologies to China but, for the most part, a lot of the manufacturing is carried out by Taiwanese companies in China. Perhaps it is even more truthful to argue that the conditions in China are becoming more and more unfavourable with increased taxes and increased minimum wages.

OK enough about that. To be honest I was thrilled to see the program come to Taiwan and highlight the tremendous potential and innovation here. Taiwan definitely deserves the exposure and I feel Taiwan will continue to hold its on in the tech industry for some time to come.

You can watch the program online by clicking here.

BBC: Taiwan takes on tech innovation

AUO’s Q3 Profit Drops

AU Optronics (AUO) Q3 profit has dropped to the lowest in six quarters further reflecting the declining economic situation. AUO are not sure how long it will take for the industry to recover and are taking steps to ensure they can survive the current storm. According to the Taipei Times:

AU Optronics Corp (AUO, 友達光電), the world’s third-largest maker of flat panels, posted the weakest quarterly net profit in six quarters as corporations and consumers tightened spending on PCs and slim-screen TVs.

Net income plunged 96 percent to NT$860 million (US$25.83 million) in the July-September quarter, from NT$22.57 billion a year earlier. It was the lowest level since the second quarter of last year, during which the company made NT$5.92 billion, AUO said in a statement.

“We are not sure how long it will take for the industry to pick up from the U-shape trough. But, we are taking actions against this downturn,” vice chairman Chen Hsuen-bin (陳炫彬) told investors.

AUO plans to cut its capital spending for this year and next year by a combined 20 percent to less than NT$200 billion by pushing back the start of mass production of a new advanced line by one year to 2010, joining bigger rival LG Display Co Ltd’s step of slowing capacity expansion.

Cutting back on CAPEX and downsizing the workforce is probably all they can do right now. It is good to hear they have chosen the former option. Companies should also right now be looking to aggressively control their costs and improve their efficiencies accross the board. To gain advantages in any other area is going to be difficult.

The reduction in profits also reflects a reduction in the average selling price and the intensification of competition. According to the Taipei Times:

In the third quarter, the average selling price for liquid-crystal-display (LCD) panels dropped 21 percent from last year to an average US$137 per unit, which drove gross margins down from 23 percent a year ago to 8 percent, as the weakening global economy reduced consumer consumption.

AUO is one company big enough and smart enough to weather the current downturn. It all depends on how long the downturn lasts.

Taipei Times: AUO’s Q3 profit drops to six-quarter low

Taiwan Weathering the Storm

So the financial crisis is getting deeper. Trying to ignore it doesn't help. It seems there is not much anyone can do. Paulson in the states is trying to figure out a new rescue package but the markets must self correct before there is any hope of recovery. How much worse will it get? Nobody knows. Are we at the bottom yet? Nobody knows (but I suspect not). Taiwan hasn't escaped the storm however.

First up the Taipei Times reports the unemployment rate on the island hit a four year high. They said: "Global financial turmoil took the blame yesterday for pushing the nation’s unemployment rate up to 4.27 percent last month, a figure expected to continue climbing as the crisis unfolds." The Times continues writing: "The unemployment rate hit a four-year high of 4.27 percent last month, up 0.13 percentage points from a month earlier, defying a seasonal drop in unemployment normally seen at the end of summer, a report by the Directorate General of Budget, Accounting and Statistics (DGBAS) showed yesterday."

The Taipei Times also reports Nanya posted their sixth straight quarterly loss. The times says: "Nanya Technology Corp (南亞科技), the nation’s second-largest supplier of computer memory chips, yesterday posted its sixth consecutive quarterly loss, which it attributed to the collapse of chip prices over an unresolved glut and sagging demand." The Times continues saying: "In the quarter ending Sept. 30, net losses widened to NT$8.77 billion (US$265 million), compared with NT$1.66 billion a year earlier and NT$7.36 billion in losses in the second quarter."

Reuters reports Nanya's main Taiwanese competitor, PowerChip, also has had a rough time. According to Reuters: "Shares of Powerchip Semiconductor Corp Taiwan's top DRAM chip maker, fell more than 3 percent to a one-month low on Wednesday, a day after the company posted a record quarterly loss that was worse than forecast. At about noon, Powerchip shares had slid 3.4 percent to T$4.61, underperforming the main TAIEX's 1.4 percent fall."

Circuits Assembly (CA) writes the globabl financial meltdown is having an impact on EMS/ODM companies. According to CA:

There’s no question the broader economic situation is being felt at the EMS/ODM level. ODM shipments are dropping tremendously this year. The No. 1 company, Compal Communications, a supplier to Motorola, Nokia and LG, has seen shipments drop 33.3% from last year. No. 2 Quanta dropped 7.5%, while Qisda is down a whopping 50%. TPV dipped 14.3%, and Asus is down 6.1%.

CA continues:

The big question now is, Of the EMS companies and ODMs, who’s going to survive? And are there any likely bankruptcies? According to a new report by iSuppli, most firms are okay. However, without naming names, Pick suggested some firms could be in trouble during a recession. The iSuppli report, “Recession Hits EMS/ODMs,” is due out Nov. 7.

Digitimes reports leading IC Testing and LCD vendors have also seen a significant decline in their profits. According to Digitimes:

Two leading Taiwan IC testing and LCD equipment suppliers Mirle Automation and Test Research (TRI) have seen a decline in profits for the first three quarters of 2008 due to weak market conditions, according to the companies.

Mirle said that its pre-tax profits dropped 46% on year to NT$43 million (US$1.31 million) in September 2008 although its sales for the month were up 4% from a year earlier to NT$3.4 billion.

For the first nine months of the year, pre-tax profits totaled NT$440 million, down 24% from a year earlier, Mirle noted. FPD (flat-panel display) and materials handling equipment accounted for 55% of Mirle's total revenues.

There are many other doom and gloom stories out there. There is not much left companies can do until demand for computer products picks up again. Computer products in most households are luxury items and people will cut such items out of their budgets first. If the economy continues to slide there will be a lot of strife in the future and all these companies can really do is to continue working towards their strengths, staying as financially strong as possible (easier said than done), and getting ready for when the economy recovers. Until then, life is going to get increasingly uncomfortable for all those in the tech industry.

Taipei Times: Jobless rate hits four-year high
Taipei Times: Nanya posts sixth consecutive loss
Reuters: Powerchip shares hit 1-month low after record loss
Circuits Assembly: Recession Spells End of Foxconn Effect, Analyst Says
Digitimes: IC testing and LCD equipment vendors report declined profits for Jan-Sep period

Financial Crisis Affecting Electronics Industry

We have noted before on this blog that the electronics industry will not be immune to the downturn in the US Economy and that the financial impact will have some effect on the consumer electronics industry. Business Week recently wrote about the predicted downturn. According to Business Week:

Spending on electronics and appliances fell 13.8% in September, compared with 5.5% in August, according to MasterCard Advisors' SpendingPulse service, which provides data on MasterCard (MA) transactions. Electronics retailer Best Buy (BBY) may have had a 9% to 10% sales decline in the second half of September, according to Bernstein Research analyst Craig Moffett, citing company filings. The financial crisis that's crimping interbank lending and dragging down stocks accelerated in the second half of last month.

Sales of big-ticket items such as flat-screen TVs may be in for the biggest drubbing, analysts say. Rather than pony up for a new high-definition TV set, many consumers with analog TVs may simply opt for sub-$100 digital TV converter boxes as they gear up for the February 2009 deadline for the digital-TV transition. "HDTV sales may be the next shoe to drop," Moffett wrote in a recent report. That bodes ill for manufacturers like Sony (SNE), Samsung, and LG. Fewer TV purchases could in turn have an impact on satellite-TV providers DirecTV (DTV) and DISH Network (DISH), whose sales of service packages are closely linked to new TV purchases, Moffett reckons.

Makers of high-end laptops also have cause for concern, says Roger Kay, founder of consultancy Endpoint Technologies Associates. Apple said on Oct. 14 that it's shaving $100 off the price of its entry-level MacBook (BusinessWeek.com, 10/15/08). Other manufacturers may follow suit or roll out more ultramobile PCs, smaller, less powerful laptops that can cost $50 to $200 less than laptops, Kay says. So far, that category of machines "has not cannibalized our notebook sales," says Mark Hill, general manager for U.S. sales. Nor has Acer detected a slowdown in demand, he says.

Declines in the consumer electronics industry will definitely impact the entire electronics value chain. Right from the raw material suppliers, through to the PCB manufacturers, chipset manufacturers, silicon foundries, computer manufacturers etc. This value chain is predominant in Taiwan and therefore the negative effect of a worsening global economy may be magnified in Taiwan.

The technology industry in Taiwan is the predominant industry and tech companies make up a large portion of the TAIEX. Also, a lot of Taiwanese people have a lot of their wealth invested in the markets. Any decline in the market will significantly impact their desire to spend.

No doubt there will be interesting times ahead for many companies here in Formosa. Some industries will at a guess consolidate and over the short term there maybe cutbacks and layoffs but, when the economy improves, those companies left standing will have a lot of opportunities.

Business Week: Rough Times Ahead for the Electronics Industry

Slow Down in the Tech Industry

It had to happen eventually. The financial crisis in the States will effect every sector of the global economy. Some sectors will be more affected than others and some industries may take longer to feel the effects than others. The tech industry here in Taiwan is starting to feel the pinch.

EE Times notes:

Based on some key indicators from Taiwan's chip and PC houses, the signs in the IC industry are going from bad to worse.
ASE, Global Unichip, UMC and others posted lackluster sales figures for August. Taiwan PC assemblers Compal, Wistron and others reported mixed results in the channels.

But that's not what the doctor ordered amid a slump--and overall slowdown--in the IC sector. Recently, for example, Gartner Inc. lowered its IC forecast in 2008 and 2009.

In one indicator, Taiwan foundry provider United Microelectronics Corp. (UMC) reported net sales of NT$8.165 billion ($256 million) for the month of August, down 21.74 percent from a year ago and down 4.35 percent from July of 2008.

Taiwan chip-packaging giant Advanced Semiconductor Engineering Inc. (ASE) reported net revenues of NT$8.781 billion ($275.4 million) for August, up only 0.8 percent from July of 2008 but down 6.5 percent from a year ago.

Not all was doom-and-gloom in Taiwan. ASIC provider Global Unichip Corp. said its August revenues were up 7 pecent from July 2008 and up 37 percent over last year.

On the PC front, the signs are mixed among Taiwan's ODM giants, such as Quanta Computer. Quanta makes notebook PCs on an OEM basis for many PC makers.

"Sluggish corporate notebook PC markets in both North American and Europe negatively impacted Compal's shipments, offset by growing consumer notebook in Eastern European and emerging markets," said Daniel Amir, an analyst at Lazard Capital Markets, in a report.

"Despite weaker-than-expected European markets, Quanta maintains its full year 40 million notebook shipments guidance (26 percent increase over 2007), as the demand from emerging markets remains solid," Amir said.

"August shipments were flat or slightly up versus July. We forecast 10 percent growth month/month in September, following a 3 percent increase in August and 20 percent quarter/quarter growth both in 3Q and 4Q," he added.

Another Taiwan PC assembler, Wistron, "raised its 3Q shipments estimate to 5.8 million from 5.4 million, 25 percent quarter/quarter," he said. "Wistron is tracking ahead of the industry average, as it is gaining market share from other notebook ODMs."

Additional bad news for Taiwan Semiconductor Manufcaturing Corp. (TSMC) is that a few investment banks (aren't they extinct yet?) have downgraded forecasts for TSMC. Digitimes observes:

A number of investment banks, including Friedman Billings Ramsey (FBR), HSBC and Merrill Lynch, have issued a conservative guidance over the prospects for Taiwan Semiconductor Manufacturing Company (TSMC) in the fourth quarter of this year.

FBR expects an 8-10% sequential decline in TSMC shipments in the fourth quarter due to order cuts from a number of sectors, including games consoles, digital video equipment, STBs, DVDs, flat panels as well as Bluetooth chips.

TSMC is likely to see its shipments continue to decline 5-10% sequentially in the first quarter of 2009, FBR added.

HSBC expects TSMC's capacity utilization rate to fall to 75% in the fourth quarter and further decline to 65% in the first quarter of 2009 – the lowest level in recent years.

While forecasting TSMC's revenues are to drop 18-22% sequentially in the fourth quarter, Merrill Lynch also lowered its projection for TSMC's EPS (earnings per share) for 2008 from NT$4.11 to NT$3.68 and cut its target TSMC share price from NT$60 to NT$57.

Digitimes notes additional concerns in the IC sectory saying:

Due to the global economic downturn, consumer electronics, handset and notebook makers are more conservative about demand in the fourth quarter. With unclear order visibility, Taiwan IC distributors estimate fourth-quarter orders are to decline 10-20% compared with earlier expectations.

Despite low expectations for the third quarter, earlier some IC distributors were still optimistic about the outlook for the year-end holiday season and forecast sales growth of 20-30%.

Yeah. It had to happen and now it has. Nobody is immune!

EE Times: Taiwan IC, PC results point to slowdown
Digitimes: TSMC bracing for gloomy prospects in 4Q08, say investment banks
Digitimes: Taiwan IC distributors estimate orders down 10-20% on earlier expectations in 4Q08