Taiwan Semiconductor Manufacturing Co (TSMC), which supplies chips for Apple's s iPhone 7 series, expects this quarter to be a stronger, benefiting from increasing demand for high-end smartphones. The Taiwanese company expects revenue for this quarter to drop by only 1 percent to 2 percent, or between NT$255 billion and NT$258 billion (US$8.03 billion and US$8.12 billion), compared with NT$260.41 billion last quarter.

Chips for mobile phones and other communications devices were the biggest revenue source for TSMC, accounting for 60 percent last quarter.

"High-end smartphone demand is better than we expected. The deployment of the 4G [network] in China and upgrades in emerging markets has also driven demand," TSMC co-chief executive officer Mark Liu told an investors' conference in Taipei.

As demand remains healthy, inventory reduction is expected to be "relatively mild" in the current quarter, Liu said.

TSMC is aiming to maintain its gross margins at about 50 percent over the next five years, company chief financial officer Lora Ho said.

Capital spending this year is to increase to more than US$9.5 billion, Ho said.

The company’s positive outlook came as it reported another record profit of NT$96.76 billion for last quarter, up 33.4 percent from NT$72.51 billion in the second quarter.

TSMC’s third-quarter performance surpassed expectations as sales of iPhone 7 models were better than expected, while Samsung's Note 7 recall crisis also affected performance.

TSMC's Liu said high-performing computing devices, including data centers and virtual reality gadgets, would replace mobile phones as the biggest revenue growth driver in 2019.

The company has viewed the automotive and the Internet of Things (IoT) sectors as its two key growth drivers in revenue over the next five years.

As for the company’s progress in developing advanced technologies, Liu said it is "well on track," adding that the company is scheduled to ship its first batch of 10-nanometer chips in the first quarter next year.

Regarding 7-nanometer technology development, Liu said: "We are confident that we are ahead of competitors."

TSMC said it is scheduled to ramp up production of 7-nanometer chips in the first quarter of 2018.