TSMC Q1 profit inches past estimates, but growth seen slowing

By Ambar Warrick

Investing.com -- Taiwan Semiconductor Manufacturing Co Ltd (TW:2330), also known as TSMC, reported a slightly stronger-than-expected net income in the first quarter as some resilience in global chip demand helped fuel stronger sales.

TSMC’s net income rose 2.1% to 206.99 billion Taiwan dollars ($1 = T$30.627), the company said in a press release on Thursday. The figure was higher than Reuters estimates for a profit of T$192.5B. Net sales also grew 3.6% to T$508.63B, which was at the bottom end of a January forecast range.

TSMC logged earnings per share of T$7.98, more than the prior year’s reading of T$7.82 a share.

But both sales and net income dropped sharply from the prior quarter, indicating that demand for semiconductors was slowing down amid worsening economic conditions across the globe.

TSMC flagged slowing demand in its fourth-quarter results in January, and said it would cut its capital spending in 2023 to between $32B and $36B from $36.3B in the prior year.

TSMC expects a slowdown in demand through the first half of 2023. But demand could pick up at a quick pace in the latter half of the year, especially as more companies move into using artificial intelligence, which requires a large amount of computer infrastructure.

The firm, which is a major supplier to technology giants including Apple Inc (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Advanced Micro Devices (NASDAQ:AMD), makes the most advanced semiconductor chips in the world, and is also Asia’s most valuable company.

But investors have somewhat soured towards TSMC due to political risks emerging from tensions between Taiwan and China. This has also seen TSMC attempt to move production outside the island state, with plans for a $40B factory in Arizona.

Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) had bought more than $4.1B worth of TSMC shares between July and September last year. But it had then offloaded 86% of its stake by end-2022, citing concerns over souring relations between China and Taiwan.