On the 26th local time, Texas Instruments released its second-quarter financial forecast, with revenue of US$4.2 billion to US$4.8 billion, lower than analysts' estimates of US$4.96 billion, and profit of US$1.84-2.26 per share, lower than the average estimate of 2.28 Dollar.

According to Bloomberg, Texas Instruments said it was forced to slash its revenue forecast by about 10% as Chinese customers closed factories or reduced operating levels. But so far, the chipmaker has not seen widespread order cancellations, suggesting the problem is more of a logistical issue than a general decline in demand for electronics.

“A lot of customers are closed — they don’t accept couriers,” Chief Financial Officer Rafael Lizardi said in an interview. He said it’s time to say when those factories will resume production and how quickly they will make up for lost production time. Or whether Chinese consumers have cut back on how much spending during the lockdown is too early.

Shares of Texas Instruments fell as much as 9% in after-hours trading on the news, before rebounding to a decline of about 5%. The stock, which rose 15% last year, has fallen less than other chipmakers in 2022 as of Tuesday's close.

Texas Instruments is the largest maker of analog and embedded processing chips, used in everything from home appliances to military and space hardware, and has tens of thousands of products and customers, making its forecast an indicator of demand across the economy.

Chip buyers have struggled with shortages over the past year, but not all products are in tight supply. Customers have been expediting orders for certain products to complete the kits they already have, Lizardi said. That could mean that the overall build-up in inventories is often associated with a "cyclical correction," but "we don't see this as a cyclical up or down," he said.

TI's results were an important signal for investors worried about the possibility of a cyclical surplus in the chip industry after excessive production increases. The Philadelphia Semiconductor Index is down 26% this year, more than the major indexes.

Market research firm Gartner expects industry-wide sales to grow 14% this year, but growth will slow to 3.6% in 2023. The pandemic drove a 26% surge in chip demand last year.

Analysts and investors have begun to worry that while there are still shortages of some types of chips, idle inventories of other types of chips are rising. Some predict it could lead to a drop in orders once supplies of key components are in place.

Texas Instruments reported that its internal inventories were building, but inventory levels remained below normal. Lizardi said the company added $150 million in inventory, but was still nowhere near its 190-day inventory target.

Unlike some chipmakers' management teams, TI's leaders have been cautious about the industry's long-term growth. Many of the company's peers believe that more and more devices use chips, making the market more stable. In contrast, executives at Texas Instruments said there could be no certainty about the balance of supply and demand going forward.