Taiwan Semiconductor Manufacturing Co. saw its business hit by demand issues in the latest quarter, and the company expects further pressure from “inventory adjustment” in the current period.
The semiconductor-foundry company said Thursday that it expects $15.2 billion to $16 billion in second-quarter revenue, below the FactSet consensus that was just over $16 billion.
For the first quarter, TSMC
2330,
TSM,
saw NT$508.63 billion (equivalent to $16.72 billion) in consolidated revenue. The dollar figure was 4.8% below year-earlier levels and 16.1% below levels from the prior quarter.
Analysts tracked by FactSet were expecting NT$519.66 billion in revenue for the period.
“Our first quarter business was impacted by weakening macroeconomic conditions and softening end market demand, which led customers to adjust their demand accordingly,” Chief Financial Officer Wendell Huang said in a release. “Moving into second quarter 2023, we expect our business to continue to be impacted by customers’ further inventory adjustment.”
The company generated NT$206.99 billion in net income for its latest quarter, or NT$7.98 share (US$1.31 per American depositary share). Gross margins came in at 56.3%, down 5.9 percentage points on a sequential basis.
For the full year, TSM expects revenue to decline at a low- to mid-single digit rate. On its prior earnings call, the company had given a forecast for 2023 to “be a slight growth year” on a dollar basis.
“Due to weakening macroeconomic conditions and softening end market demand, fabless semiconductor inventory continued to increase in the fourth quarter and exited 2022 at a much higher level than we expected,” Chief Executive C.C. Wei said on the earnings call, according to a transcript provided by AlphaSense/Sentieo. “In addition, the recovery in end market demand from channels reopening is also lower than our expectation.”
Given those factors, “the fabless semiconductor inventory adjustment in [the first half of 2023] is taking longer than our prior expectation” and “may extend into [the] third quarter this year before rebalancing to a healthier level,” he continued.
The full-year outlook, “though lower, still implies TSMC’s revenue will go up [roughly] 25%” on a half-over-half basis, wrote Bernstein analyst Mark Li.
The company expects $32 billion in $36 billion in capital expenditures, with Evercore ISI analyst C.J. Muse noting that the company “surprisingly reiterated” that budget “amid fears of pushouts/cancellations driving this number closer to $30 [billion].”
TSMC’s U.S.-listed shares were ahead nearly 2% in Thursday’s premarket trading.
“Net-net, no huge surprise on the updated demand commentary, but the reiterated capex forecast is certainly better than expected — on one hand supporting strength in 2023 equipment spending (despite recent commentary), though on the other hand potentially raising concerns around a spending pocket in 2024 as capacity adds are digested,” he added.
Muse said that while the capital-expenditure commentary “may appear positive for [semiconductor production equipment companies] at first blush,” he sees the grouping “as largely range-bound near-term.”
