UPDATE 1-TSMC cuts Q4 sales and margin forecasts

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By Baker Li

TAIPEI, Dec 1 (Reuters) - TSMC, the world's top contract chip maker, cut its fourth-quarter sales and profit margin forecasts on Monday, blaming weaker shipments caused by the slowdown in the global economy.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) 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.

The new sales forecast is about 30 percent lower than TSMC's sales in the third-quarter.

"(That's) due to a reduction of wafer shipments resulting from continuing weakness in global economic conditions," TSMC said in a statement.

TSMC also cut its forecast for its gross profit margin in the October-December quarter to 30-32 percent and trimmed its estimate for its operating profit margin to 17-19 percent, lower than its previous forecast by 4 percentage points each.

The revision came after the Taipei stock market closed on Monday. Shares of TSMC were unchanged and those of smaller local rival UMC fell 1.2 percent, against the main TAIEX share index's 1.3 percent gain.

Taking about a two-thirds share of the global foundry market together, the two Taiwan firms are facing the economic slowdown that has forced consumers to cut spending on new computers, cellphones and flat-screen TVs that require microchips.

TSMC has already imposed a hiring freeze and industry sources close to the company said last week TSMC had told department heads they may have to cut costs by 20 percent in the near future, through lay-offs or by making workers take mandatory unpaid leave.

In October alone, TSMC's sales dropped 10.6 percent from a year earlier, its worst decline in a year and a half. UMC said its sales dropped 21.9 percent for the month, following similar drops in the previous two months. (US$1=T$33.3) (Reporting by Baker Li; Editing by Mike Nesbit)