Taiwan Semiconductor Manufacturing Co (TSMC) saw fourth quarter net profit drop 22.5 percent year on year, continuing the previous quarter's decline as the chip maker's customers cleared out their inventories.
TSMC, however, expects business to pick up this year due to anticipated growth in smartphone and tablet markets, it said Wednesday.
In the fourth quarter, net profit reached £683 million, a decrease from £880 million in the same period a year earlier. Revenue for the fourth quarter was £2.26 billion, down 4.9 percent year over year, but met the company's forecasts.
The decline came as global semiconductor growth was close to zero in 2011, said TSMC CEO Morris Chang. TSMC, the world's largest contract chip manufacturer, has customers that include smartphone and tablet chip vendors Qualcomm and Nvidia.
Weak economic conditions in the world have been to blame for the lower demand for chips. Growth in the semiconductor market, however, will return this year, Chang added, but only at 2 percent, slightly down from TSMC's original projection of 3 to 5 percent.
"Mobile products will enjoy particularly strong growth, and TSMC is will positioned in the mobile product markets with the right technologies," he said. "We should therefore perform better than the overall semiconductor industry for this year."
TSMC started volume production this year of its more advanced chips by using its 28 nanometer manufacturing process. TSMC's 28 nanometer chips already contribute 2 percent of the company's revenues. But in 2012, that figure will grow to 10 percent, Chang said.
Chips being built with a 20 nanometer manufacturing process will see production at the end of this year, while chips using the 14 nanometer process will start in 2014, he added. The technology will allow mobile chip vendors to deliver higher-performance processors for smartphones and tablets.