Chipmaker giant Taiwan Semiconductor Manufacturing expects its sales to fall short of analysts’ estimates and plans to cut costs in anticipation of a potential industry recession and stricter U.S. trade controls, Bloomberg said. What will happen to Taiwan Semiconductor Manufacturing company stock? 

Taiwan Semiconductor Manufacturing Company Limited annual report

According to the forecast, sales in the first quarter will range from $16.7 billion to $17.5 billion. Analysts had forecast an average of $17.9 billion. The firm said capital spending this year would decline to $32-36 billion. This could mark the first decline in revenue for TSMC in 4 years, highlighting the depth of the global slowdown in demand for high technology.

The world’s largest contract chip maker, which is the exclusive supplier of silicon chips to Apple Inc. (NASDAQ:AAPL) for the iPhone and Mac, is banking on its technology and scale advantages to weather the downturn. But the U.S. is tightening controls on chip trade from China; at the same time, the Taiwanese giant is being hit by rising interest rates, soaring inflation and fears of a possible global recession as consumers are forced to cut spending.

The company’s main partner, smartphone maker Apple, was forced to cut estimates for its products after chaos at its Zhengzhou plant linked to virus-exposed vulnerabilities in the company’s supply chain.

The Taiwanese company is left only to try to expand capacity overseas, especially in the U.S. and Japan, seeking to meet customer demands for diversification and fighting competition from Samsung (KS:005930) and Intel (NASDAQ:INTC).Rising depreciation and operating costs, combined with uncertainty about the recovery in demand for smartphones, are limiting its gross margins.

According to experts, the market is very pessimistic about TSMC’s prospects. If the company’s capital spending can grow by at least 10% year-on-year, investors will see this as a positive signal.

Earlier, we reported that Apple is developing its first touchscreen laptop.