The world's top contract chipmaker TSMC posted its first annual decline in sales in 22 months. TSMC saw July sales decline on a monthly basis for the fourth consecutive month, signalling a difficult start to the third quarter. TSMC said on Wednesday that sales in July fell 3.4 percent from a year earlier, the first annual decline since September 2009.

The industry appears to being hit by economic uncertainties and customer inventory adjustment. It is also seeing the cost of Labour in China increasing. The outfit said has trimmed its full-year capital spending outlook by 5 percent and reported second-quarter earnings below forecast.

TSMC chairman Morris Chang has revised down his forecast on the growth of the semiconductor industry excluding memory to 4 percent from 7 percent in the beginning of this year, and the foundry industry to 7 percent from 15 percent.

It can be re-assured that, while it is having problems, its rival UMC is going the same way.  The outfit said last week it expected revenue to decline by 11-13 percent in the third quarter from the previous quarter, the biggest drop in 10 years for what is traditionally the high season.