Chipmaker Texas Instruments expects revenue hit as China lockdowns dent demand

According to a Reuters report on April 26, Texas Instruments forecast second-quarter revenue below Wall Street estimates on Tuesday, hit by reduced demand due to COVID-19 lockdowns in China, sending its shares down 7% in extended trading.

China has put Shanghai under a lockdown since late March and neighboring city Kunshan has also tightened curbs to control the country’s biggest COVID-19 outbreak since late 2019.

It has caused dozens of Taiwanese firms, many making parts for the semiconductor and electronics industries, including Apple suppliers, to suspend operations.

The chipmaker said the issues were primarily due to disruptions at the factories of its customers and not due to shipping or distribution problems, adding its own factories have been running at high levels of utilization.

“It just became clear we were experiencing lower demand, particularly due to COVID-19 restrictions in China,” Dave Pahl, head of IR at Texas Instruments, said.

“We continue to see expedites for deliveries. However, we did see that our customers’ manufacturing operations were being impacted,” he added.

Texas Instruments expects second-quarter revenue to be between $4.20 billion and $4.80 billion, compared with analysts’ expectations of $4.94 billion, according to IBES data from Refinitiv.

“This will likely reverberate throughout the industry as investors try to get a firmer grasp of the impact,” Logan Purk from brokerage Edward Jones said, adding this situation is tied to a significant wild card of how long these lockdowns will last in China.

Purk, however, expects the chip shortage to continue through the summer and improve as more capacity comes on line in the fall.

Last year, when demand for electronics, including smartphones and consumer gadgets, rose, many semiconductor makers doubled down on production.

For the first quarter, Texas Instruments’ revenue rose 14% to $4.91 billion. Analysts were expecting revenue of $4.74 billion, according to IBES data from Refinitiv.

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