Chip Making Giant TSMC Records Biggest Profit Drop in Five Years

On Thursday, October 19, the Taiwan Semiconductor Manufacturing Firm (TSMC) reported its Q3 2023 numbers with revenue standing at 211 billion New Taiwan {dollars} ($6.69 billion). This was larger than the anticipated revenue of NT$191.43.

This has been the biggest revenue decline for the reason that first quarter of 2019. TSMC’s income declined by 10.83% year-over-year, amounting to NT$546.73 billion, and its internet earnings decreased by 24.87% year-over-year to NT$211 billion. These figures distinction with TSMC’s third-quarter income steering, which projected income starting from $16.7 billion to $17.5 billion. In its earnings report, TSMC famous:

“Our enterprise was supported by the robust ramp of our industry-leading 3-nanometer know-how and better demand for 5-nanometer applied sciences, partially offset by prospects’ ongoing stock adjustment.”

The semiconductor firm famous a 13.7% enhance in third-quarter income in comparison with the second quarter. Through the second quarter, the Taiwanese firm skilled a decline in quarterly revenue for the primary time in 4 years, primarily attributable to decreased demand for shopper electronics like smartphones and laptops following the preliminary influence of the pandemic. Analysts anticipate a resurgence in demand as chip inventories at smartphone and PC producers deplete.

Through the earnings name earlier in the present day, TSMC CEO C.C. Wei stated that he expects the inventories to proceed to say no. “Because of the persistent weaker total macroeconomic circumstances and sluggish demand restoration in China, prospects stay cautious of their stock management. That’s why we count on the stock digestion to proceed within the fourth quarter,” stated Wei.

Smartphone Demand Stabilizing

The excellent news for TSMC and the broader semiconductor {industry} is that there are some early indicators of demand stabilization within the smartphone and PC market. In keeping with Canalys knowledge, the worldwide smartphone market solely contracted by 1% within the third quarter of 2023, indicating a major deceleration in its charge of decline.

Within the earlier quarter, the market noticed an 11% lower when in comparison with the identical interval within the earlier 12 months. Of their report earlier this week, Canalys noted:

“Bolstered by regional recoveries and new product improve demand, the smartphone market recorded a double-digit sequential progress in Q3, forward of the gross sales seasons.”

The demand for AI chips has skilled a surge as a result of widespread adoption of huge language fashions like ChatGPT and its Chinese language counterparts, contributing to the strong efficiency of TSMC’s shares, which have gained 19% year-to-date. Nonetheless, CEO Wei famous that whereas AI demand is on the rise, it’s “inadequate to completely compensate for” the declining demand for chips in shopper electronics.

“Shifting into fourth quarter 2023, AI-related demand continues to be robust however it’s not sufficient to offset the general cyclicality of our enterprise. We count on our enterprise within the fourth quarter to be supported by the continued robust ramp [up] of our 3-nanometer know-how, partially offset by prospects’ continued stock adjustment on the stock aspect,” added he.

For the fourth quarter, TSMC has income expectations between $18.8 billion to $19.6 billion.

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Bhushan is a FinTech fanatic and holds aptitude in understanding monetary markets. His curiosity in economics and finance draw his consideration in direction of the brand new rising Blockchain Expertise and Cryptocurrency markets. He’s constantly in a studying course of and retains himself motivated by sharing his acquired information. In free time he reads thriller fictions novels and typically discover his culinary abilities.