Chip maker reports worst quarterly net profit in a year and a half as global chip glut worsens Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, reported its worst quarterly net profit in a year and a half on Thursday, as a global chip glut worsened and orders fell.The current quarter, January-March, will be even worse, TSMC executives said, but it will mark the bottom of the current chip industry downturn. Industry analysts and investors watch TSMC carefully for signs of the health of the global technology industry because the company manufactures chips for so many different kinds of gadgets that it has a unique view of what’s going on behind the scenes.TSMC’s fourth quarter net profit dropped 18 percent year on year to NT$27.91 billion (US$856.7 million as of Dec. 31, the last day of the period reported.) Sales slid 5.4 percent to NT$74.96 billion, from NT$79.23 billion in the fourth quarter of 2005. It was the worst quarter for TSMC since the third quarter of 2005, when its net profit was NT$24.49 billion.Excess mobile phone chips on the market caused some customers to delay orders for new chips, while inventories of PC chips were also a high. “Certainly, we have seen our bookings take a beating the past few months,” said Rick Tsai, president and chief executive officer at TSMC.Things are going to get worse before they get better. TSMC expects its gross profit margin to drop by as much as 9 percentage points in the first quarter, and sales to fall to between NT$62 billion and NT$64 billion, due to the chip glut and as consumers slow their purchases of technology items after the busy holiday season. The size of the decline in TSMC’s first-quarter sales projections was larger than expected, said Cheng Ming-kai, a chip industry analyst at CLSA Asia Pacific Markets in Taiwan. Most people expect the chip industry to rebound in the second quarter, but whether it actually will or not remains to be seen, he added.TSMC plans to spend between US$2.6 billion and US$2.8 billion on new production lines and factories this year, up slightly from US$2.46 billion last year. Technology Industry