Source: Company data, the BLOOMBERG PROFESSIONALTM service, Credit Suisse estimates April sales tracking behind 2Q22 from China lockdowns. We summarise April sales from 160 Taiwan tech stocks, with sales down 16% MoM, below seasonal of down 14% MoM off a high base in March and also due to the impact on both supply/demand from the Russia/Ukraine conflict and China lockdowns. Across our coverage, 85% of companies are tracking below street’s 2Q22 expectations and only 15% are above. Semiconductor companies (-5% MoM vs seasonal -2%) in general performed better than downstream (19% MoM vs seasonal -4%) in April as they are less impacted by the production disruption.

Downstream impacted in April, trying to recover from late May. Most downstream subsectors underperformed April with NB ODMs (-35% MoM vs seasonal -1%), Cloud (13% MoM vs seasonal +3%) and Components (-12% MoM vs seasonal -1%) due to their high production exposure in China, Package & testing (-17% MoM vs seasonal -1%) suffered from lower production inefficiencies under closed loop and Display (-23% MoM vs seasonal -6%) on panel price declines. Downstream companies through results see impact on 2Q22 from production losses during the lockdown and downward consumer tech order adjustments but expect to rebound in late May/June into 3Q. On the other hand, Foundry (flat MoM vs seasonal -12%) stays on track on firm pricing and full utilisation.

Semiconductors’ 2Q22 on track, stronger markets still offsetting weakness. The semiconductor chain remains on track to their guidance across foundries, back-end and raw wafer makers as tight capacity, long lead times and more robust areas (auto/industrial, cloud, networking) offset consumer weakness in PC, Android and TV. We expect orders to hold into 3Q, although see potential inventory adjustments and some utilisation cuts by 4Q22/1H23, although would be helpful to moderate fabless/downstream inventory.