Chip Giants Face Headwinds

TSMC and ASML, key players in the semiconductor industry, are expected to reveal the impact of tariffs and a potential slowdown in AI-related demand in their upcoming earnings reports. These factors have shaken investor confidence, leading to multi-year valuation lows. TSMC's March revenue saw a surge, with a 46.5% increase from March 2024, reaching approximately US$8.66 billion. First quarter revenue also jumped 41.6% compared to the same period last year. However, concerns persist regarding potential US tariffs reducing end-product demand, which could negatively affect the semiconductor market. TSMC may also face a US$1 billion penalty related to alleged Huawei chip violations.

ASML's performance is also under scrutiny, with analysts citing slowing demand in China as a factor impacting its financials. While TSMC has a strong position in advanced chipmaking, particularly with the increasing demand for AI chips, rising operating costs linked to overseas expansion and underutilisation of mature-node facilities could pose short-term profitability risks. The outlooks from these companies will provide valuable insights into the overall health and future prospects of the semiconductor industry.