Texas Instruments says slowdown in chip demand may continue; shares fall

By Shariq Khan and Sayanti Chakraborty
FILE PHOTO: A Texas Instruments Office is shown in San Diego, California, U.S., April 24, 2018. REUTERS/Mike Blake

By Shariq Khan and Sayanti Chakraborty

(Reuters) - Chipmaker Texas Instruments said on Tuesday a slowdown in demand for microchips that started late last year may last a few more quarters. The warning from the company, often seen as a bellwether for a semiconductor industry, dragged its shares 3 percent lower to $113.88.

"We have just completed our second quarter of year-on-year decline for TI... But typically, the industry would have 4 to 5 quarters of year-on-year declines before growth resumes," Chief Financial Officer Rafael Lizardi said in a conference call with analysts.

"We are not trying to forecast the cycle, but simply offer some historical perspective."

Chipmakers have been struggling with declining demand in China as its economy slows and manufacturers face the fallout of an ongoing trade dispute with the United States.

Texas Instruments had signaled last quarter that the semiconductor cycle is on a downward turn after over 10 quarters of constant growth and that trade tensions could "impact the depth and duration of this cycle."

In the reported quarter, revenue and profit were lower from a year earlier as demand continued to slow across most markets, but higher sales of chips that are powering the rollout of 5G telecom network helped TI beat Wall Street estimates.

However, Lizardi said he expected the demand for the communication chips to be choppy in the future.

Two Wall Street analysts said the growth in the communication unit has been masking the slowdown in TI's core businesses such as industrial and automotives, and that "is not sustainable".

TI said it expects second-quarter revenue to be between $3.46 billion and $3.74 billion and earnings per share of between $1.12 per share and $1.32 per share.

Analysts were expecting revenue of $3.67 billion and profit of $1.24 per share for the second-quarter, according to IBES data from Refinitiv.

"The outlook is weaker than consensus, but not as bad as feared," said Hans Mosemann, analyst from Rosenblatt Securities.

Revenue in the first quarter fell 5.1 percent to $3.59 billion, but beat analysts' average estimate of $3.48 billion.

Net income fell to $1.22 billion, or $1.26 per share, for the quarter ended March 31 from $1.37 billion or $1.35 a share a year earlier.

Excluding items, the company earned $1.22 per share to beat Wall Street expectation of $1.13 per share.


(Reporting by Sayanti Chakraborty and Shariq Khan in Bengaluru; Editing by Arun Koyyur)