Chipmaker Taiwan Semiconductor Manufacturing (TSMC) forecast 16 percent drop in current-quarter revenue to $15.2 billion to $16 billion in the quarter ending June 30, down from $18.16 billion a year prior.
Earlier, TSMC posted a 2 percent rise in first-quarter net profit to T$206.9 billion ($6.76 billion) from T$202.7 billion a year earlier. That was the smallest quarterly growth in almost four years as global economic woes dented demand for chips.
TSMC said first-quarter revenue dropped 4.8 percent year-on-year, in line with the company’s previous forecast.
High-performance computing chips and smartphone chips represented 44 percent and 34 percent of revenue respectively. Net revenue from China grew to 15 percent from 12 percent, while net revenue from North America fell to 63 percent from 69 percent.
Speaking on an earnings call, Chief Executive C.C. Wei said first-quarter results were hurt by “softening end-market demand”, while inventory levels were “much higher” than expected and that could extend into the third quarter.
He said he expects business in the second half to be better than the first six months and that the company was investing for long-term demand despite current softness in the market.
Analysts said TSMC sales will be under pressure in the second quarter, which is traditionally a slow season for electronics manufacturers and as major clients cut back on orders.
The chipmaker forecast 2023 capital expenditure of $32-36 billion, unchanged from a previous estimate. That compared with $36.3 billion in 2022.
First-half revenue is likely to fall around 10 percent in U.S. dollar terms year-on-year, TSMC said. It sees 2023 revenue falling by a low-to-single mid-digit percent.
TSMC’s dominance in making some of the most advanced chips for high-end customers such as Apple has shielded it from a broader industry downturn.
TSMC said it plans to increase production outside Taiwan, as global attention focuses on its investment plans and various governments dangle incentives to boost chip manufacturing in their countries.
CEO Wei said TSMC was evaluating the possibility of building a speciality fabrication plant in Europe for auto chips.
TSMC late last year began construction of a second chip factory in Arizona which will start production in 2026, using advanced 3 nm technology, supporting Washington’s plans for more chip-making at home. Its total investment in the U.S. project amounts to $40 billion.
“Q1 revenue growth of 4 percent is lower than the 43 percent growth in Q4 but much better than the recent negative double-digit declines of Nvidia, Micron, and Kioxia. The decline was expected due to softening consumer demand and headcount reductions across the tech industry,” Josep Bori, Thematic Research Director at GlobalData, said.
GlobalData predicts the accelerating adoption of AI in commercial and military use cases will drive global AI chips revenue from $12 billion in 2021 to $130 billion by 2030, at a CAGR of 30 percent.