Tower Semiconductor beats profit estimates, sees more growth in 2024

By Steven Scheer

(Reuters) -Israeli contract chipmaker Tower Semiconductor beat quarterly profit and revenue estimates on Thursday and said it expects improvement throughout 2024 despite weak demand for industrial and automotive chips due to an economic downturn.

Tower, which specialises in analogue chips used in cars, medical sensors and power management, said it earned 46 cents per diluted share excluding one-off items in the first quarter of 2024, versus 55 cents a year earlier.

Revenue slipped to $327 million from $356 million.

Tower was forecast to earn an adjusted 39 cents a share on revenue of $324.5 million, LSEG data showed.

"Everyone is down year over year. It's a weak market," chief executive Russell Ellwanger told Reuters, citing large declines in demand for power management and auto chips.

"For several of the activities we have, we see the first quarter as having been a low, with some growth coming up beyond that," he added.

Ellwanger noted that auto sales are down as a function of the economy but that in other areas, such as data centres, customers have scaled back chip purchases since they previously overbought and now have large inventories.

But Tower still needed to boost production capacity, he said, adding: "There is a lot of uncertainty in the world right now. Whenever there's uncertainty, consumer buying drops".

Over the past few quarters, semiconductor firms have been focused on clearing excess inventory mainly in the automotive industry, hitting firms like Tower which makes analogue, mixed-signal chips and sensor technologies.

French-Italian firm STMicroelectronics is one of the latest chipmakers to lower its full-year guidance due to declining orders.

Ellwanger said Israel's war with Palestinian Hamas militants was not having a material impact on Tower, which expects second-quarter revenue of $350 million, with an upward or downward range of 5%, above analysts' forecasts of $334.8 million.

He said that Tower sees more than 7% sequential growth for the second quarter and then "notable growth" in the third and fourth.

Its Tel Aviv-listed shares were up 4.7% in afternoon trading.

(Reporting by Priyanka.G in Bengaluru and Steven Scheer in Jerusalem; editing by Jason Neely and Alexander Smith)