TSMC forecasts up to 16% decline in second-quarter sales amid struggle to clear inventory and weak global economy

Taiwanese chipmaker TSMC on Thursday predicted a drop of up to 16% in current-quarter sales amid a weakening global economy and as supplier Apple Inc struggles to liquidate inventory.

As the largest maker of chips that power products as diverse as phones, cars and advanced computers, Taiwan Semiconductor Manufacturing Co (TSMC) must navigate an uncertain industry outlook and interstate chip dispute. States and China which could make it vulnerable.

TSMC forecasts revenue of $15.2 billion (approximately Rs. 1,24,900 crore) to $16 billion (approximately Rs. 1,31,500 crore) in the quarter ending June 30, from $18.16 billion dollars (about Rs. 1,49,200 crore) a year ago.

Previously, the company posted a 2% increase in net profit in the first quarter, beating market expectations, but it was still the weakest quarterly growth in nearly four years as global economic difficulties hampered growth. request for chips.

Speaking on an earnings call, chief executive CC Wei said first-quarter results were impacted by “softening end-market demand” while inventory levels were “significantly higher.” higher” than expected and this could extend into the third quarter.

He said he expects business in the second half to be better than the first half and for the company to invest for long-term demand despite current market weakness.

Net profit for January to March rose to TWD 206.9 billion (around Rs 55,600 crore) from TWD 202.7 billion (around Rs 54,500 crore) a year earlier from TWD 192.8 billion. TWD (around Rs 51,800 crore) average of 21 analyst estimates compiled by Refinitiv.

TSMC, Asia’s most valuable publicly traded company, said first-quarter revenue fell 4.8% year-on-year, in line with the company’s previous forecast.

High-performance computer chips and smartphone chips accounted for 44% and 34% of revenue, respectively. China net revenue increased from 12% to 15%, while North America net revenue fell to 63% from 69%.

Analysts said TSMC’s sales would be under pressure in the second quarter, which is traditionally a slow season for electronics makers and as major customers reduce orders.

The chipmaker forecasts capital expenditure of $32 billion to $36 billion for 2023 (about Rs.263,000 crore to Rs.2,95,800 crore), unchanged from a previous estimate. This compares to $36.3 billion (about Rs. 2,98,300 crore) in 2022.

First-half revenue expected to fall about 10% in U.S. dollars year-over-year, TSMC said, as it forecasts 2023 revenue to fall below one to mid-single digit percentage .

TSMC’s dominance in making some of the most advanced chips for high-end customers such as Apple has shielded it from a broader industry downturn. But the chipmaker is likely to fall victim to the growing slowdown.

He has repeatedly said that businesses will continue to benefit from a “mega-trend” in demand for high-performance computer chips for fifth-generation (5G) communications networks and data centers, as well as a increased use of chips in gadgets and vehicles.

TSMC said it plans to ramp up production outside of Taiwan as global attention focuses on its investment plans and various governments offer incentives to boost chip manufacturing in their countries.

CEO Wei said TSMC is evaluating the possibility of building a dedicated manufacturing facility in Europe for automotive chips.

Late last year, TSMC began construction of a second chip factory in Arizona that will begin production in 2026, using advanced 3nm technology, supporting Washington’s plans for more chip manufacturing. at home. Its total investment in the US project stands at $40 billion (about Rs. 3,28,700 crore).

TSMC’s share price fell 27.1% in 2022, but has risen around 14% so far this year, giving the chipmaker a market value of $433.9 billion. (about Rs. 35,65,400 crore). The stock rose 0.6% on Thursday against a 0.4% decline in the benchmark.

© Thomson Reuters 2023

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