Fears that the chip sector's recovery is still anemic at best were confirmed yesterday when Taiwan Semiconductor Manufacturing Company Ltd forecast softening demand in the third quarter.

The prediction came as the Taiwanese foundry giant released second quarter results which showed sales up 68% to NTD44bn ($1.3bn). Operating income was up 4,110.7% to NTD12bn ($347m), while net income grew 2,886.7% to NTD9.3bn ($270m).

CFO Harvey Wang said in a statement that the firm was pleased with the results which represented the fourth quarter of growth since "we hit bottom in the second quarter of last year."

However, looking ahead, the company said it expected that July revenue will be seasonally lower. It also said wafer shipments would be off sequentially by a low single digit percentage in the third quarter, and capacity utilization would be in the low 70% range "due to the softening demand on the back of an 11.5% higher capacity level than in Q202."

To add to the chip manufacturing equipment sector's woes, it added that capex this year would be under $2bn.

While TSMC's figures do not necessarily mean the chip industry is in reverse, together with AMD and Intel's recent results, it is hard not to conclude that the recovery is not as vigorous as vendors were expecting earlier this year.

For the year to date, sales were up 21.5% to NTD80bn ($2.3bn), with net income up 82% to NTD15.9 ($457m).

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