Chipmaker TI forecasts earnings below estimates as automotive begins to falter

A Texas Instruments Office is shown in San Diego, California, U.S., April 24, 2018. REUTERS/Mike Blake/File Photo

(Reuters) -Texas Instruments forecast quarterly revenue and profit below market estimates on Tuesday, as chip inventory builds up in its key markets with initial signs of weakness in the automotive sector adding to continued industrial weariness.

The analog chipmaker's shares fell about 4% in extended trading.

Analysts believe Automotive - once one of TI's fastest growing end markets - is now starting to show signs of inventory corrections.

The pressure of high borrowing costs has dampened end-market demand for the automotive industry. U.S. new vehicle sales are expected to rise just 1% in 2024, according to car shopping website Edmunds.

Demand from industrial customers - one of the company's largest - has waned as global manufacturing activity remains weak.

A survey from the Institute for Supply Management (ISM) also showed U.S. manufacturing, an indicator of industrial activity, remained subdued in November 2023, with factory employment declining further as hiring slowed and layoffs increased.

The world's largest contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd (TSMC), warned that in terms of manufacturing capacity for analog chips, too much may be building up.

TSMC, which acts as a bellwether for chip production, raised concerns around over-capacity for analog chips, producing which requires relatively older technology compared to the machines used for building advanced chips for AI.

Peer Mobileye also forecast preliminary 2024 revenue below estimates, with a pullback in orders from its customers clearing excess inventory, further suggesting the automotive chip industry, which had managed to remain on the sidelines of the supply glut crisis, might face a downturn too.

TI forecast first-quarter revenue between $3.45 billion and $3.75 billion, compared with analysts' average estimate of $4.06 billion, according to LSEG data.

The company expects earnings in the range of 96 cents-$1.16 per share for the current quarter, missing analysts' estimate of $1.41.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Krishna Chandra Eluri)

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