If there are any advantages to scale in the world of semiconductor fabrication, they should fall to Taiwan Semiconductor (NYSE:TSM). The three other major Taiwanese fab operators combined can't match even three-quarters of TSM's revenue base. That sort of size can be handy when it comes to dealing with customers and suppliers, but it doesn't insulate the company from the cyclical nature of its business.

Like rival United Microelectronics (NYSE:UMC), Taiwan Semi is emerging from the rather nasty impact of a semiconductor inventory glut over the past year or so. Third-quarter revenue was down about 1% on an annual comparison, though up more than 18% from the second quarter. Interestingly, while both companies saw solid growth in the teens on wafer shipments, Taiwan Semi reported that their blended average selling prices have declined.

Looking at other performance metrics, the company had very high capacity utilization this quarter (96%), and it expects to be running at 100% next quarter. Looking at higher-tech products, United Microelectronics had a slight advantage this quarter on 90nm chips, as their 14% of sales exceeded Taiwan Semi's 10%. Looking at profitability, Taiwan Semi saw operating profit fall more than 4% and net income fall about 12% for this quarter, though both numbers were up strongly from the second quarter.

As what amounts to an original equipment manufacturer (OEM), the company is beholden to its customers for growth. While the roster of customers includes strong players like Altera (NASDAQ:ALTR), NVIDIA (NASDAQ:NVDA), Qualcomm (NASDAQ:QCOM), and Broadcom (NASDAQ:BRCM), it's not as though there have been a lot of major upward earnings revisions amongst that group.

Still, I've got to believe that the semiconductor space is going to recover at some point, and Taiwan Semiconductor should recover along with it. There's always the danger that rivals will go loco with reckless capacity additions, but I'm not sure that the markets are in an especially keen mood to underwrite a lot of financing for new fabricators. I know firsthand just how dangerous it can be to utter the words, "It can't get any worse." But for those who have patience or believe that the odds favor an improving semiconductor outlook, Taiwan Semiconductor could be an appealing idea.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). NVIDIA is a Motley Fool Stock Advisorrecommendation. The Fool has a disclosure policy.