Contract chipmaker Taiwan Semiconductor Manufacturing Co. on Thursday warned weak macroeconomic conditions and inventory adjustments would result in falling revenue and declining margins.
The company TSM, +0.63% said first-quarter revenue will range from $16.7 billion to $17.5 billion — some 14% worse sequentially than the fourth quarter at the midpoint — and its operating margin will fall to between 41.5% and 43.5%, from the fourth quarter’s 52%. Analysts polled by FactSet had forecast first-quarter revenue of $17.64 billion.
More broadly, it sees revenue dropping by between a mid- to high-single-digit percentage in the first half, but a rising revenue outlook for the second half.
Its fourth-quarter profit jumped 78% to 295.9 Taiwan dollars ($9.7 billion), beating consensus estimates at 289 billion Taiwan dollars, on a 43% rise in revenue, to record highs. Revenue did fall slightly short of estimates at 626 billion Taiwan dollars versus 636 billion.
TSM shares rose 2% in premarket trade. Its U.S.-listed shares have dropped 41% over the last 52 weeks.
“Entering 2023, we continue to observe softness in consumer end market segment, while other end market segments such as data center related have softened as well,” said CEO CC Wei on a conference call, according to a transcript from S&P Global Intelligence. “As customers and the supply chain continue to take action, we forecast a semiconductor supply chain inventory, while reduced sharply through first half 2023, to rebalance to a healthier level.”
“Having said that, we also start to observe some initial signs of demand stabilization, and we will watch closely for more signals. We forecast the semiconductor cycle to bottom sometime in first half 2023, and to see a healthy recovery in second half this year,” said Wei.
Analysts led by Gokul Harrihan at JPMorgan said they were not surprised by the outlook “reset,” but were surprised by the outlook for an improvement in the second half. “This could be a potential downside risk later in the year, if the strong 2H23 rebound doesn’t materialize,” he said in a note.