Asian chipmakers, including the world's top contract chipmaker TSMC, reported sharply worsened quarterly earnings and braced for another uncertain quarter as a weak global economy hits demand for computers.

On Thursday, Taiwan's TSMC reported a worse-than-expected 35 percent decline in profit to T$30.4 billion ($1 billion), its fourth straight quarterly drop.

South Korea's Hynix Semiconductor, the world's No.2 computer memory chipmaker, reported its first quarterly operating loss in two years.
     
In Japan, Hynix's rival Elpida Memory also tumbled to a quarterly loss.

'With ongoing global macroeconomic uncertainty, demand weakness in PC market is expected to continue,' Hynix said in its earnings statement on the dynamic random access memory (DRAM) market outlook for the fourth quarter.

Contract prices of DRAM chips tumbled 29 percent in the July-September quarter to around production costs, forcing most chipmakers to lose money.

Hynix reported a worse-than-expected 277 billion won ($245 million) third-quarter operating loss, while Elpida posted a 44.7 billion yen ($588 million) operating loss. Elpida was further hit by a strong yen.

'If the yen stays at current levels, we will move production to Taiwan as soon as preparations are made,' Elpida President Yukio Sakamoto said. 'Overseas production is our only option.'     

Elpida, Japan's biggest DRAM chipmaker, would transfer some production from its Hiroshima factory to Rexchip Electronics Corp, its joint venture with Taiwan's Powerchip .     

'For investors the choice now is chip heavyweights, regardless of whether they are foundries or design houses, because they have deep pockets so they can still invest in R&D, developing new products to make sure they won't fall behind in the next upturn,' said Allen Chen, a fund manager at Capital Investment Trust Corp in Taipei.

'But institutions won't touch DRAM shares at the moment.'     

 Analysts said there were chances of a recovery in the first half of next year, when inventory adjustment was expected to be complete and chip prices bottom out.     

'Inventory adjustment should complete in the first quarter and go back to a slightly lower than normal demand pattern after,' said Nomura analyst Patrick Liao.  'How the chip makers perform also depends on who their clients are and whether their clients are doing well,' he said.     
TSMC chairman Morris Chang said on Thursday that the chip industry could grow 3 percent to five percent next year, though TSMC's growth would outpace that by several points. He expects inventory correction to finish at the end of this year.

'After all the destocking, we may see a sudden surge as amazing and strong as we saw in the third quarter of 2009. The winter this time is not as cold as that in 08-09.' - Reuters