TSMC set to gain from PC inventory correction, analysts believe
Analysts believe that TSMC is poised to benefit from the correction of PC inventory, as demand in the PC market improves and the semiconductor inventory correction cycle nears its end.
The Taiwan Semiconductor Manufacturing Company (TSMC) is unlikely to make further adjustments to its revenue forecasts for this year despite recent fluctuations in the semiconductor industry, according to an analyst. TSMC, like other chip manufacturers, has faced challenges in a weak market with excess inventory as chip orders decline. However, as the third quarter approaches its end and TSMC's earnings results are expected next month, a Taiwanese analyst believes that relief is on the horizon, thanks to new smartphone product launches and the conclusion of inventory corrections in the personal computing sector.
TSMC set to gain from PC inventory correction, analysts believe
During TSMC's second-quarter earnings report and analyst call, there was a pessimistic tone, with management cautioning that the semiconductor industry's inventory correction cycle might take longer than anticipated. Consequently, the company revised its full-year revenue guidance, marking the second time it had done so.
Following the revision, rumors circulated that TSMC might adjust its guidance once more, prompting the company to issue a clarification due to concerns about its impact on share prices. As September draws to a close, insights into the PC market and the release of new iPhones by Apple have led one analyst to conclude that not only will TSMC refrain from further revenue guidance revisions, but its revenue should also improve in the coming year.
The rationale behind this optimism is that the semiconductor inventory correction cycle hit its lowest point last year, and demand in the PC market is on the rise as the inventory glut dissipates. The correction in inventory should lead to increased orders next year, with chipmakers like TSMC benefiting from robust demand for smartphones.
One crucial metric to watch in TSMC's upcoming earnings release is its revenue. 2023 has been a strong year for the artificial intelligence (AI) industry, particularly for NVIDIA, which has garnered substantial stock market and industry interest in its GPUs. Since TSMC supplies a significant number of products to NVIDIA, the impact of NVIDIA's robust business on TSMC's earnings will be closely observed.
The Taiwanese analyst notes that market excitement over AI is not a new phenomenon. He points out that in 2016, there was significant interest in analytical AI, used in applications like facial, image, and speech recognition. The current trend revolves around generative AI, where models create their own content, as seen in the popularity of chatbots like ChatGPT.
To cater to this renewed interest in AI, Taiwanese companies can focus on the hardware aspect of the industry. TSMC is one of the few companies globally capable of manufacturing advanced chips at scale, and these chips are integral to training and operating AI models. Market estimates suggest that global demand for AI server shipments this year will range from 180,000 to 190,000 units. Microsoft is expected to account for approximately one-third of this demand by purchasing around 50,000 units, while other tech giants like Meta and Alphabet will procure 35,000 and 25,000 units, respectively.
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