TSMC shares fell nearly 7% in Taipei on global chip outlook concerns

TAIPEI (Reuters) – Taipei-listed TSMC shares fell 6.7% on Friday after the company's first-quarter earnings report cut its chip sector growth forecast and did not revise its capital spending plans, contrary to expectations.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker, expects second-quarter sales to rise as much as 30% as it rides a wave of demand chips used in artificial intelligence (AI) applications. First-quarter earnings also exceeded estimates.

But it left this year's capital spending plans unchanged at between $28 billion and $32 billion, and confirmed that it expects 2024 revenues to rise in the low to mid-20% range in US dollars.

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

TSMC, a major supplier to Apple and Nvidia, also lowered its growth forecast for the global foundry sector to mid- to high-teens percent from a previous forecast of about 20%.

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

“If capital expenditure is only maintained at the previous level, it means that the profit is not as expected,” he said.

Another fund manager in Taiwan, who requested anonymity, said that given the recent rise in TSMC shares, investors had high expectations ahead of first-quarter earnings.

“Its capital expenditures have not been very strong, and the percentage of advanced process technology revenues compared to overall revenues is still very low,” the manager said.

The poor performance of TSMC's share price weighed on the broader Taipei market which closed down 3.8%, losing 774 points – the most it has lost in a single day. Morale was also damaged by escalating tensions between Israel and Iran.

TSMC faces other challenges as well.

Speaking on Friday after being honored for his services to Taiwan, Maurice Chang, the retired and revered founder of TSMC, said the company's current leadership needs “great wisdom” to overcome the challenges of “dying” globalization given how the company benefits so much from freedom. commerce.

“TSMC also faces resource challenges: land, water, energy and talent, which need continuous support from the government and all others,” he said at the presidential office in Taipei, referring to constraints that Taiwan’s technology industry has long been concerned about.

(Reporting by Ben Blanchard and Yimo Li; Additional reporting by Faith Hong, Roger Tong and Jenny Kao; Editing by Shri Navaratnam and Edwina Gibbs)