TSMC Q1 earnings seen down 5% y/y, Q2 also looks tough

Taiwanese chipmaker TSMC is expected to post a 5% fall in first-quarter net profit on Thursday, with global economic woes denting demand for semiconductors used in everything from cars to advanced computing extending into the current quarter.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chipmaker and a major Apple Inc supplier, is likely to report net profit for the January-March period of T$192.5 billion ($6.30 billion), down from T$202.7 billion a year earlier, according to the average of 21 analysts polled by Reuters.

“Looking ahead into the second quarter, which is typically a slow season, TSMC’s sales on a quarterly basis will be under pressure from inventory adjustments as major clients cut back on orders,” said Alex Huang, who manages about T$5 billion for Capital Investment Trust Corp.

But momentum may pick up as early as the third quarter, he added, corresponding with the improved outlooks for that quarter projected by Apple, Nvidia Corp and Advanced Micro Devices Inc, some of TSMC’s biggest customers.

TSMC, Asia’s most valuable listed company, has forecast demand will recover in the second half of this year. It will provide guidance for the second quarter and update previous forecasts on its earnings call at 0600 GMT on Thursday.

TSMC already reported its first quarter revenue of T$508.63 billion ($16.69 billion), at the bottom of a January forecast range of $16.7 billion to $17.5 billion, compared to $17.57 billion for the year-ago period.

TSMC said in January its capital spending in 2023 would decrease to between $32 billion and $36 billion from $36.3 billion in 2022.

The company’s concentration of production in Taiwan at a time of growing military tensions with China, which claims the island as its own territory, has spooked some investors.

U.S. billionaire Warren Buffett last week called TSMC a “fabulous company,” but said it faced risks because of its location.

Buffett’s investment conglomerate Berkshire Hathaway Inc bought more than $4.1 billion of TSMC’s shares between July and September 2022, but in February said it had sold 86% of its stake by year-end.

TSMC’s Taipei-listed stock has risen by around 16% so far this year, outperforming the broader market, which is up 13%.