TSM - Chips sink as Taiwan Semiconductor 2023 outlook sends shivers across sector

2023-07-20 11:29:03 ET

Taiwan Semiconductor ( NYSE: TSM ) lowered its revenue outlook for 2023 on Thursday, resulting in a steep sell-off for the semiconductor industry.

Taiwan Semiconductor ( TSM ) shares fell 4.5% after the global foundry said it expects full-year revenue to decline 10% year-over-year, worse than the low-to-mid single decline it expected last quarter.

The company's CFO, Wendell Huang, said third-quarter sales are forecast to be between $16.7B and $17.5B, up 9.1% sequentially at the mid point.

Taiwan Semiconductor ( TSM ) added that it expects its 2023 capital spending plans to be at the lower end of its previously forecast range of $32B to $36B.

The global foundry also said it is pushing back the start of production from its new plant being built in Arizona to 2025, from 2024, in part due to insufficient amount of skilled workers required for equipment installation.

Chip equipment makers also fell on back of the earnings report, as Applied Materials ( AMAT ), KLA Corp. ( KLAC ) and Lam Research ( LRCX ) fell 4%, 3% and 2.5% , respectively.

AMD ( NASDAQ: AMD ), which is a client of Taiwan Semiconductor ( TSM ), fell 3% even as Wolfe Research started coverage on the semiconductor company with an outperform rating.

In addition to starting coverage on AMD, Wolfe Research said it was favorable on companies that have "strong secular growth" with the likely cyclical improvement, including Qualcomm ( QCOM ), Micron Technology ( MU ), Qorvo ( QRVO ), Skyworks Solutions ( NASDAQ: SWKS ), Nvidia ( NASDAQ: NVDA ), GlobalFoundries ( GFS ) and Marvell Technology ( MRVL ).

Conversely, it is "most concerned" on areas that have not yet had a correction, including automotive, industrial and analog.

Separately, Barclays said Nvidia ( NVDA ), which is also a TSM client and AMD competitor, could reinvigorate the AI trade when it reports quarterly results, as the firm is expecting another blowout report for the Jensen Huang-led company.

Nvidia ( NVDA ) shares fell 1.8% in mid-day trading.

Skyworks Solutions ( SWKS ) shares fell 1.3% as Barclays downgraded the company on a lack of upcoming catalysts.

Analyst Blayne Curtis added that the Apple ( AAPL ) content story ended up "flat" as it got a boost from WiFi 6E, but lost the 2.4GHZ to Murata. Additionally, there's not a lot to look forward as the Android market is still weak, which could also negatively impact Qualcomm ( QCOM ).

Qualcomm ( QCOM ) shares fell 0.7% on back of the report.

Most other semiconductor stocks were lower in Thursday trading, including NXP Semiconductors ( NXPI ), Micron Technology ( MU ), ON Semiconductor ( ON ) and Analog Devices ( ADI ).

More on Taiwan Semiconductor

• Taiwan Semiconductor Manufacturing Company Limited 2023 Q2 - Results - Earnings Call Presentation
• Taiwan Semiconductor: AI Exposure With Less Bubble Hype?
• AMD CEO Su said to visit Taiwan to meet suppliers, including Taiwan Semi

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