TSMC dips 6.7% after Q1 earnings fail to beat expectations

TSMC Q1 earnings: Taipei-listed shares of TSMC plummeted by 6.7 per cent on Friday following its first-quarter earnings report, which tempered expectations for growth in the chip sector and maintained its capital spending plans, contrary to market anticipations.

Despite forecasting a potential 30 per cent increase in second-quarter sales, driven by demand for chips in AI applications, TSMC refrained from revising its capital expenditure, which remained in the range of $28 billion to $32 billion for the year. Additionally, the company reiterated its expectation of a low- to mid-20 per cent revenue growth in US dollar terms for 2024.

However, TSMC revised its outlook for the global semiconductor industry, excluding memory, to a growth rate of approximately 10 per cent, down from the previous forecast of over 10 per cent. Similarly, it downgraded its growth forecast for the global foundry sector to a mid-to-high teens percentage gain from around 20 per cent.

Market analysts expressed disappointment with the unchanged capital expenditure, particularly as it was anticipated that TSMC would increase spending for high-end packaging. The lack of an increase suggested potential profit concerns.

The subdued performance of TSMC's shares weighed heavily on the broader Taipei market, which closed down 3.8 per cent, marking its largest single-day loss of 774 points. Additionally, market sentiment was dampened by escalating tensions between Israel and Iran.

TSMC faces additional challenges, as highlighted by its retired founder, Morris Chang. Chang underlined the need for the current leadership to demonstrate wisdom in navigating challenges to globalisation and addressing resource limitations such as land, water, power, and talent, which have long concerned Taiwan's tech industry.

(With Reuters inputs)