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Shares of TSMC are down nearly 7% in Taipei on concerns about the global chip outlook

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TAIPEI (Reuters) – Taipei-listed shares of TSMC fell 6.7% on Friday after the company’s first-quarter earnings report, in which it scaled back its expectations for chip sector growth and did not revise its investment plans, in contrast the expectations.

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, forecasts that sales could rise as much as 30% in the second quarter due to the surge in demand for chips used in artificial intelligence (AI) applications. The profit for the first quarter also exceeded expectations.

But it left its investment plans for this year unchanged at levels between $28 billion and $32 billion and reiterated that it expected 2024 revenues to rise between the low and mid 20% in US dollar terms.

It lowered its outlook for the global semiconductor industry excluding memory to a growth rate of around 10%, down from a previous forecast of more than 10%.

TSMC, a major supplier to Apple and Nvidia, also cut its growth forecast for the global foundry sector to a mid-to-high percentage gain from a previous projection of around 20%.

Allen Huang, vice president of Mega International Investment in Taipei, said the market was reacting to the revised outlook for the semiconductor industry, adding that TSMC was expected to increase capital spending on high-end packaging this year.

“If capital expenditure were only maintained at the previous level, it means profits are not as expected,” he said.

Another fund manager from Taiwan, who asked not to be identified, said investors had high expectations for first-quarter earnings results given TSMC’s recent stock rally.

“Investments have not been as aggressive and the percentage of sales from advanced process technologies compared to total sales is still quite low,” he said.

The poor performance of TSMC’s stock prices dragged the broader Taipei market, which closed down 3.8% and recorded the biggest single-day decline. Sentiment was also hit by rising tensions between Israel and Iran.

TSMC also has other challenges.

In his speech on Friday after being honored for his service to Taiwan, retired and highly respected TSMC founder Morris Chang said the company’s current leadership needed “great wisdom” to meet the challenges of the ” dying” globalization, given that the company had benefited so much from free trade.

“TSMC also faces challenges in terms of resources: land, water, power and talent, which need continued support from the government and all others,” he said at the presidential office in Taipei, referring to the constraints faced by Taiwan’s technology industry has long been concerned about.

(Reporting by Ben Blanchard and Yimou Lee; additional reporting by Faith Hung, Roger Tung and Jeanny Kao; Editing by Shri Navaratnam and Edwina Gibbs)

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