TSMC's earnings slide as chip industry enters downturn

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is set to unveil a 30% drop in third-quarter profits on Thursday, reflecting the ongoing slowdown in the global chip industry. Analysts had anticipated this decline, with TSMC's profit estimated at $6 billion for the period of July to September. This marks the second consecutive quarter of profit decline for the world's largest contract chipmaker, attributed to weakened global demand for semiconductors since the latter half of the previous year.

TSMC's earnings slide as chip industry enters downturn

TSMC's revenue for the third quarter stood at approximately $17 billion, down 20% from the previous year, a figure well within the company's projected range. This dip mirrors the broader industry trend as inventories at smartphone and computer manufacturers diminish, potentially paving the way for an uptick in restocking demand.

Despite these challenges, TSMC's stock price has seen an uptick due to increased chip demand for artificial intelligence applications. However, investors remain cautious as the company navigates uncertainties in customer demand. Reports suggest that TSMC has requested its major suppliers to delay the delivery of high-end chip-making equipment, although the delay is expected to be short-term.

Analysts are closely monitoring TSMC's outlook for the fourth quarter and beyond, predicting a slow start to the next year with a 10% growth expected in the first quarter. Concerns linger over potential order cancellations towards the end of the year and modest restocking demand. The fate of TSMC's partnership with major customer Apple remains pivotal, with analysts expressing concerns that Apple might revise its orders.

In September 2023, TSMC reported net revenue of approximately NT$180.43 billion, reflecting a 4.4% decrease from August 2023 and a 13.4% decrease from September 2022. Cumulative revenue for January through September 2023 amounted to NT$1,536.21 billion, indicating a 6.2% decrease compared to the same period in 2022.

The recovery of the semiconductor industry depends on various factors, including the global economic climate, consumer demand, and technological advancements. Analysts remain cautiously optimistic about TSMC's future, emphasizing the need for adaptability and strategic planning in response to evolving market dynamics. TSMC's performance in the upcoming quarters will undoubtedly be closely monitored by industry stakeholders and investors alike.

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