Blaming accounting scandals in the U.S., chipmaker

Taiwan Semiconductor Manufacturing

(TSM) - Get Report

reported lower-than-expected quarterly earnings Thursday and warned that things could get worse.

Taiwan Semiconductor also announced that it would cut capital spending to less than $2 billion from $2.6 billion amid falling demand. That news was weighing heavily on chip-equipment stocks in the U.S. in early trading.

Applied Materials

(AMAT) - Get Report

fell 7%, and

Novellus

(NVLS)

and

KLA-Tencor

(KLAC) - Get Report

were each down 5%.

Qualcomm

(QCOM) - Get Report

shed 8% after being downgraded ahead of its earnings.

The losses were contributing to weakness in the

Nasdaq

, which was off about 1.7% in early trading.

Chairman Morris Chang said corporate malfeasance in the U.S. had dented consumer confidence in the quarter and, as a result, he said the company's directors and supervisors would form an auditing committee with independent directors.

TSMC earned 7 cents per share in the quarter, up from 5 cents in the first three months of the year but shy of analysts' estimates. The firm, which manufactures

Microsoft's

Xbox chip, has seen weak demand from makers of graphics chips, personal computer chipsets and games. Microsoft was down 2% to $45.25.

Mobile phones, digital cameras and networking equipment added support, however.

The company said it would show no revenue growth in the third quarter amid declining shipments and a 5% drop in average selling prices. It also added that falling demand along with rising capacity would cut its capacity utilization rate to just over 70% in the third quarter from 85% in the second quarter.