TAIPEI, Apr 26 (AP) -- Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, Tuesday reported a sharp fall in revenue for the first quarter compared to the previous three months because of declining wafer shipments and the weak U.S. dollar.

The company supplies chips to several of the biggest firms in the global high-tech sector, and the semiconductors are used in a variety of products, like desktop computers, notebooks, mobile phones and digital cameras.

Texas Instruments Inc. and graphics chip developer Nvidia Corp. are among its clients.

TSMC said its first-quarter revenue totaled 55.65 billion New Taiwan dollars (US$1.77 billion; €1.36 billion), a fall of 12.9 percent from the NT$63.87 billion recorded for last year's final quarter.

The decrease "mainly resulted from an 8.8 percent decrease in wafer shipments and a 4.4 percent weaker U.S. dollar against the local currency, while average wafer selling price remained at the same level," TSMC chief financial officer Lora Ho said.

First-quarter revenue was also lower compared to the same period last year, when it amounted to NT$57.51 billion.

The company's net income for the first quarter of the year totaled 16.82 billion New Taiwan dollars (US$535.42 million; €412.45 million), a fall of 24.2 percent from the NT$22.18 billion for the final quarter of 2004.

Chairman Morris Chang told investors in Taipei he was sticking to an earlier forecast that 2005 would be a flat year for the worldwide chip sector, though 2006 would see an improvement.

"This year, the world chip industry could decline by one percent, but for next year, we see growth in a single digit or up to 10 percent," Chang said, adding he was predicting 7 percent growth for the industry.

TSMC said it was using 78 percent of its chip production capacity in the first quarter, down from 88 percent in the fourth quarter of 2004. However, the company predicted the utilization rate would improve to 80 percent in the second quarter.

Shipments in the second quarter would rise by mid-to-high single-digit percent from the January-March period, the company said.

TSMC's smaller rival, United Microelectronics Corp., is expected to announce its first-quarter performance on Wednesday.