Taiwan Semiconductor Manufacturing Co. forecast worse-than-anticipated revenue for the current quarter, reflecting a persistent slump in demand for everything from smartphones to server chips.
(Bloomberg) — Taiwan Semiconductor Manufacturing Co. forecast worse-than-anticipated revenue for the current quarter, reflecting a persistent slump in demand for everything from smartphones to server chips.
Taiwan’s largest company expects sales of $15.2 billion to $16 billion this quarter, a shade below the $16.1 billion analysts projected on average. But it’s sticking with earlier plans to spend as much as $36 billion upgrading and expanding capacity in 2023. The company expects a low- to mid-single-digit revenue decline in 2023 — about in line with estimates.
TSMC gave that outlook after posting first-quarter net income that exceeded lowered expectations, suggesting it’s keeping a lid on costs while taking advantage of its market leadership. It’s projecting gross margins of 52% to 54%, generally surpassing the 52.5% average estimate.
Taiwan’s largest company is grappling with persistently weak electronics demand, as consumers and corporations tighten their budgets to deal with soaring inflation and a potential global recession. PC shipments crashed by 29% in the first quarter, led by Apple Inc.’s Mac lineup, according to the latest IDC figures.
TSMC executives told analysts Thursday they believed the market was “passing through the bottom” this quarter though they expected mobile and PC demand to remain “soft” throughout 2023. It posted net income of NT$206.9 billion ($6.8 billion) for the March quarter, compared with the NT$194.2 billion analysts projected on average. TSMC, maker of the most advanced chips for global electronics leaders from Apple to Nvidia Corp., previously reported disappointing revenue for the three month period.
Executives said in January they expected revenue to decline by a mid-to-high single-digit percentage in the first half, though business should pick up thereafter as the Chinese economy and consumer spending stabilizes.
TSMC’s market leadership likely helped buoy its margins. On Wednesday, fellow industry bellwether ASML Holding NV — the largest producer of equipment essential to advanced chipmaking — forecast better-than-anticipated June quarter revenue. But net bookings, a barometer for future growth, plunged 46% from a year earlier. Lam Research Corp., another equipment supplier to TSMC, also forecast adjusted earnings per share that missed the average analyst estimate.
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Over the longer term, investors are hopeful that TSMC’s leading technology can galvanize growth particularly as a surge in artificial intelligence development and applications drive demand for the high-end computing chips and datacenters required for training and hosting AI models.
What Bloomberg Intelligence Says
TSMC’s ramp-up in 3-nanometer node production, AI and server-related high-performance-chip (HPC) fabrication orders will be key areas of focus in the 1Q conference call following a disappointing 15.4% decline in March sales. These factors will determine whether the company can maintain revenue-growth momentum in 2023, as consensus suggests, and counter a semiconductor-sector outlook clouded by weaker-than-anticipated smartphone and PC demand, along with stagnant inventory-reduction progress.
– Charles Shum, analyst
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The outlook however remains clouded by geopolitical uncertainty, including global efforts to encroach upon TSMC’s turf in advanced chipmaking and China’s growing military threats against Taiwan.
Warren Buffett said in a recent interview that he divested the majority of Berkshire Hathaway Inc’s $4.1 billion stake in TSMC partly due to geopolitical concerns.
TSMC is under pressure to produce its advanced chips abroad and is building more capacity in the US and Japan. Global policymakers and customers are increasingly wary of their technological reliance on Taiwan, which Beijing has claimed is part of China.
–With assistance from Cindy Wang, Gao Yuan, Betty Hou, Peter Elstrom and Sabrina Mao.
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