Taiwan Semi Stock Edges Higher After Earnings Beat Expectations

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Taiwan Semiconductor

Manufacturing beat expectations for its first-quarter profit but forecast a revenue slowdown in the second quarter. It’s another sign of potentially prolonged weakness in the semiconductor industry.

The world’s largest contract chip maker said Thursday that net profit for the quarter ended March 31 rose to 206.99 billion Taiwanese dollars (US$6.76 billion) from 202.73 billion Taiwanese dollars in the same period the previous year.

TSMC
’s
(ticker: TSM) first-quarter revenue increased 3.6% from a year earlier to 508.63 billion Taiwanese dollars. Revenue in U.S. dollars was $16.72 billion, down 4.8% from the prior year. 

Analysts had expected net profit of $6.30 billion on revenue of $16.95 billion, according to a FactSet poll. The company’s monthly sales figures had already alerted investors to a likely sales miss. 

TSMC is the world’s largest third-party foundry, and dominates the market for high-end chips—including making the main processors inside Apple (AAPL) iPhones, Qualcomm (QCOM) mobile chipsets, and in processors made by

Advanced Micro Devices

(AMD).

“Our first-quarter business was impacted by weakening macroeconomic conditions and softening end-market demand, which led customers to adjust their demand accordingly” said TSMC’s chief financial officer, Wendell Huang. “Moving into second quarter 2023, we expect our business to continue to be impacted by customers’ further inventory adjustment.”

The company said its second-quarter revenue is expected to be between $15.2 billion and $16.0 billion. It expects a second-quarter operating profit margin between 39.5% and 41.5%, down from 45.5% in the first quarter.

“The decline was expected due to softening consumer demand and headcount reductions across the tech industry. However, its relative resilience versus industry peers is a testament to TSMC’s technology leadership and strategic positioning in the global semis supply chain,” wrote Josep Bori, research director at

GlobalData
,
in a research note.

American depositary receipts of TSMC were up 1.2% in premarket trading on Thursday.

TSMC’s warning comes just a day after

ASML Holding

(ASML), a critical supplier to the global chip-making industry, said it was seeing “mixed signals” on demand despite improving profit and sales. 

Write to Adam Clark at [email protected]