TSMC shares nosedives in Taipei amid global chip outlook concerns

TSMC shares dip: Shares of TSMC listed in Taipei plummeted 6.7 per cent on Friday following the release of the company's first-quarter earnings report. TSMC, the world's largest contract chipmaker, tempered expectations for growth in the chip sector, failing to revise its capital spending plans as anticipated.

Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW) projected second-quarter sales to potentially surge by up to 30 per cent, buoyed by demand for chips used in artificial intelligence (AI) applications. Additionally, its first-quarter profit exceeded estimates.

However, the company maintained its capital spending plans for the year in the range of $28 billion to $32 billion, and reiterated its expectation for 2024 revenue to increase in the low- to mid-20 per cent range in U.S. dollar terms.

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

Allen Huang, vice president of Mega International Investment in Taipei, noted that the market reacted to TSMC's revised semiconductor industry outlook. He said that TSMC was anticipated to boost capital expenditure this year for high-end packaging, and the absence of such an increase hinted at lower-than-expected profitability.

Another Taiwan fund manager, who preferred anonymity, highlighted investors' high expectations following TSMC's recent stock rally and expressed concerns about the company's cautious capital expenditure stance.

TSMC's underperformance weighed heavily on the broader Taipei market (TWII), which closed down 3.8 per cent, marking its most substantial single-day drop. Sentiment was further dampened by escalating tensions between Israel and Iran.

In addition to market challenges, TSMC faces other hurdles. Morris Chang, the retired founder of TSMC, emphasized the need for "great wisdom" in navigating the threats to globalisation. He underscored the importance of addressing resource constraints, such as land, water, power, and talent, which have long been concerns for Taiwan's tech industry.

(With Reuters inputs.)