Chip Supplier Reports 76% Drop in Net Income BUSINESS ASIA By Bloomberg

By Andrea Tan

Chartered Semiconductor Manufacturing, a supplier of chips used in the Xbox 360 and video iPod, posted the smallest profit in five quarters as customers used up stockpiles.

Fourth-quarter net income fell 76 percent to $6.4 million from $26.5 million, a year earlier, the Singapore-based Chartered said Friday. Sales dropped 7.7 percent to $339.1 million.

Chartered forecast profit and sales to fall in the current three months, as demand for computers and game players declines, suggesting the industry may not see a recovery at least until the next quarter. The company joins industry leader Taiwan Semiconductor Manufacturing in reporting a smaller profit because of an increase in worldwide supplies of chips.

“First-quarter guidance for the industry is slightly worse than expectations due to lower handset and PC demand,” said Pranab Kumar Sarmah, head of electronics research at Daiwa Institute of Research in Hong Kong. “However the recovery in the second quarter looks to be intact as inventories clear up.”

Chartered forecasts net income of between $1 million and $11 million this quarter. Sales are estimated to drop to between $318 million and $330 million. The company reported profit of $25.3 million and sales of $355.2 million in the first quarter of last year.

Chartered expects to outpace a forecast 7 percent to 9 percent sales growth in the chip industry this year by at least a few percentage points, the company said.

The company’s biggest customer is Broadcom, a maker of chips for the video iPod, Apple’s most expensive model of music players. Chartered also makes chips that power Microsoft’s Xbox 360 central processing unit, and for IBM and Advanced Micro Devices.

Taiwan Semiconductor, the world’s biggest customized chipmaker, last week posted an 18 percent decline in fourth-quarter profit to 27.9 billion New Taiwan dollars, or $849 million, the first drop in five quarters. Texas Instruments and Motorola, users of Taiwan Semiconductor’s most advanced chips, this month reported lower-than- expected earnings and rising inventories.

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