By Jess Macy Yu
TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (TSMC) <2330.TW> said demand from mobile device makers is likely to push October-December revenue growth to 10 percent from three months prior, in a quarter when client Apple Inc (AAPL.O) begins sales of its iPhone X.
The world's largest contract chipmaker also expects annual revenue growth of 5 to 10 percent for the next few years, and capital expenditure slightly above $10 billion (£7.5 billion), executives said at an earnings briefing on Thursday.
TSMC earlier reported a 7.1 percent fall in third-quarter profit, a slightly milder decline than analysts estimated. Revenue rose 1.5 percent, marginally beating the firm's forecast.
"Even though demand was slightly dampened by supply chain inventory reduction, our customers' third-quarter growth was largely healthy," said co-Chief Executive Officer Mark Liu.
The results come soon after TSMC named Liu as successor in June to retiring Chairman Morris Chang - widely regarded as the father of Taiwan's chip industry - leaving C.C. Wei as sole CEO. They also come days before TSMC celebrates its 30th anniversary and about a week before iPhone X pre-orders begin.
Demand for increasingly capable smartphones as well as for servers for cloud computing has seen chipmakers' share prices surge this year, with TSMC jumping 68 percent. Overall global chip market growth this year will likely be 16 percent, TSMC said.
But competition is set to increase. South Korea's Samsung Electronics Co Ltd <005930.KS>, the world's biggest memory chip maker, plans to triple its share of the contract chipmaking market within five years. There is also the threat from mainland China which is fostering a domestic chip industry.
"In terms of a lot of fabs (fabrication plants) in mainland China, we don't like it but we are very competitive. We'll continue to compete of course and maintain our market share," Wei said at the earnings briefing.
Profit was T$89.93 billion (£2.2 billion) in July-September versus the T$88.19 billion average of 21 analyst estimates in a Thomson Reuters poll. Revenue was $8.32 billion and operating margin was 38.9 percent.
TSMC forecast October-December revenue at $9.1 billion to $9.2 billion, with an operating margin of 37 to 39 percent.
During the quarter, on Nov. 3, Apple will begin shipping the iPhone X which is widely expected to carry TSMC-made chips. The device follows the recently launched iPhone 8 whose sales are reportedly slower than those of predecessors.
For all of 2017, TSMC said revenue growth will likely be close to the high end of its 5 to 10 percent target range.
The firm also said 2017 will mark a milestone in annual capital spending as it raised its forecast by 8 percent to $10.8 billion, mainly to accelerate capacity build-up of 7 nanometre chip manufacturing technology.
(Reporting by Jess Macy Yu; Editing by Anne Marie Roantree and Christopher Cushing)