(Recasts with quotes, Q3 guidance and details)
By Baker Li
TAIPEI, July 31 (Reuters) - TSMC (2330.TW), the world's top contract chip maker, beat market expectations with a 13 percent rise in quarterly profit on rising chip sales, but forecast minimal sales growth and flat margins for the third quarter.
TSMC was the latest semiconductor company to express concerns over slower demand and analysts say chip inventories could swell if the global economy slows sharply and consumers cut back on sending on computers, mobile phones and other hi-tech goods.
A day after its key competitor, United Microelectronics Corp (UMC) (2303.TW) (UMC.N), flagged a flat third quarter, TSMC said on Thursday its third-quarter sales would rise about 4 percent from the second quarter -- in line with market expectations.
TSMC said its third-quarter gross profit margin should be 45-47 percent, versus 45.6 percent in the previous three months, with its operating profit margin coming in between 34-36 percent, versus the second quarter's 34.5 percent.
"They are facing risks if inventories built up for their clients," said Nigel Lee, who manages T$750 million ($24.5 million) for Taiwan's National Investment Trust.
"I have no doubt about their efforts to move up the tech ladder to further cut costs, but the big question is demand is going down now," said Lee, who has TSMC and UMC shares in his portfolios.
TSMC and UMC together control around two-thirds of the global foundry market and count Texas Instruments TXN.N as a major client.
Taiwan Semiconductor Manufacturing Co Ltd's (TSMC) (TSM.N) guidance came as it posted a net profit of T$28.771 billion in the April-June quarter, higher than T$25.484 billion a year ago and the first quarter's T$28.143 billion.
Analysts had expected TSMC to earn T$28.17 billion in the second quarter, according to Reuters Estimates.
At its quarterly investor conference, TSMC Chief Executive Officer Rick Tsai said sales growth in the global semiconductor market this year would be 4 percent, at the bottom of TSMC's previous estimate of 4-6 percent growth.
But Tsai said sales growth of the global market for foundries, or made-to-order chip makers, would still outpace growth of the global semiconductor market.
"Demand seems to be going down," said Tsai.
"I don't have a crystal ball to tell me how demand will be in the next few quarters, but if demand doesn't get worse and inventory is under control, that won't have a big impact on our business."
Third-quarter PC sales are likely to be slightly higher than the second quarter, while mobile phone sales could be slightly lower, he said, adding that prices of its chips made by each technology node would not be higher next year than this year.
TSMC announced the results and forecasts after the Taipei stock market closed on Thursday. TSMC shares fell 1.4 percent and UMC shares dropped 0.4 percent, while the main TAIEX .TWII lost 0.7 percent.
TSMC shares gained 3 percent in April-June, while UMC shares fell 14 percent, in line with the drop in the main index. But TSMC is still down about 9 percent so far this year amid a global equity selloff sparked by fears of slowing economic growth. ($1=T$30.6) (Editing by Ken Wills and Lincoln Feast)