Intel's profits fell 15 per cent as revenues and margins declined in 2012, with the world's biggest chipmaker by sales suffering from the downturn in its core PC market. The Silicon Valley company blamed weak PC sales on poor macroeconomic conditions and the popularity of tablets. Fourth-quarter revenues of $13.5bn were in line with Wall Street expectations, but down 3 per cent on a year earlier. Paul Otellini, chief executive, told an analyst conference call that the company was fighting back with next-generation processors for thinner "ultrabook" laptops, hybrid convertible devices and tablets. We see the industry in a period of transition and hyper-innovation. We are well positioned to take advantage of these trends ... from the lowest-powered portable devices to the most powerful data centre servers," he said. PC shipments declined between 4.9 and 6.4 per cent in the fourth quarter year on year, according to differing statistics from the Gartner and IDC research companies this month. They cited the failure of the new Windows 8 operating system to ignite the market when it was released at the end of October, as well as consumers" preference for lower-cost tablets. Intel currently has its processors in only 10 tablets and seven smartphones, compared to 140 ultrabooks. But Mr Otellini was enthusiastic about all-day battery life, thinner laptops and new designs for convertibles that would drive growth over the next two years. "I've seen the prototypes of the industrial designs and they're really exciting products," he said. However, for the near term, the Silicon Valley group forecast revenues of $12.7bn for the first quarter, below an analyst consensus of $12.9bn. Intel shares fell 5 per cent to $21.55 on the news in after-hours trading in New York, having risen 2.6 per cent during the day. Earlier in the day, Taiwan's TSMC, the largest contract chipmaker, reported a 32 per cent rise in fourth-quarter profits as its factories made chips based on the designs of the UK's Arm for the booming smartphone and tablet markets. Intel has been dabbling in contract manufacturing with three small companies and the Bloomberg news agency reported on Thursday that it had signed up Cisco Systems as its biggest customer to date. Mr Otellini said Intel's single greatest asset was its cutting-edge manufacturing, with chips of circuit widths of 22 billionths of a metre representing half its volume in the fourth quarter, while the rest of the industry was yet to ship at this smaller size. Intel also announced an extra $2bn in capital spending in 2013 to begin moving up from 300mm to 450mm-diameter silicon wafers, which allow chips to be cut from them at much lower cost.