Texas Instruments forecast fans fears of chip industry downturn

BENGALURU: Chipmaker Texas Instruments Inc on Tuesday (Oct 25) forecast fourth-quarter revenue and profit below estimates as it expects demand across most of its end markets to decline, sending its shares down 5%.

After a two-year boom in the chip industry, triggered by tight supply and high demand, a downturn is setting in as personal electronics makers and retailers, who are sitting on bloated inventories due to inflation-hit demand, cut orders for chips.

On the earnings call, TI said order cancellations increased during the third quarter. Chip makers Advanced Micro Devices and Micron Technology have also warned of worsening demand.

“During the quarter we experienced expected weakness in personal electronics and expanding weakness across industrial,” TI chief executive Rich Templeton said.

While TI called the automotive sector an exception to this trend, Summit Insights Group analyst Kinngai Chan noted that many automakers continue to order double the chips they need and expects the demand to slip to pre-pandemic levels in the first half of next year.

Shares of the Dallas, Texas-based company fell to US$154 in extended trading. They have declined about 14% so far this year, mirroring decline in shares of its peers as investors brace for the chip industry boom to normalize.

The company forecast fourth-quarter revenue between US$4.40 billion and US$4.80 billion, compared with estimates of US$4.93 billion, per Refinitiv data. It forecast profit between US$1.83 and US$2.11, below estimates of US$2.21.

TI said it does not expect a “meaningful” or “significant” impact on its revenue from US restrictions on exports to China, where it makes 25% of its revenue from.

In the third quarter, the company reported a 13% rise in revenue to US$5.24 billion on strong demand for its semiconductors from the auto sector. Analysts had expected US$5.14 billion.

Excluding items, the company earned US$2.45 per share, beating estimates of US$2.39. – Reuters

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