World’s Largest Chip Maker Reports Poor Profit for the Second Time in a Row

Taiwan Semiconductor Manufacturing Company (TSMC) is set to announce a 30% decrease in third-quarter profits this Thursday, reflecting a deceleration in the chip sector.

Analysts had seen this loss coming, with the company’s profit estimated at $6 billion for the July-September period. This marks the second consecutive quarter of profit reduction for the world’s largest contract chip manufacturer, which attributes it to the waning global demand for semiconductors since the latter part of the previous year.

TSMC’s third-quarter revenue reached approximately $17 billion, showing a 20% drop compared to the prior year, a figure that falls within the company’s anticipated range.

This downturn aligns with the industry’s overall trend as inventories at smartphone and computer manufacturers deplete, setting the stage for an anticipated resurgence in restocking demand.

TSMC disclosed its net revenue for September 2023, which stood at approximately $180.43 billion. This figure represents a 4.4% decline from August 2023 and a 13.4% reduction from the same month in 2022.

The cumulative revenue for the period from January through September 2023 totaled $1,536.21 billion, indicating a 6.2% decrease compared to the corresponding period in 2022.

Stock Price Increase

Amid these challenges, TSMC’s stock price has seen a notable upsurge due to heightened chip demand for artificial intelligence applications. However, investors continue to exercise caution as the company grapples with uncertainties in customer demand.

Reports indicate that TSMC has encouraged its key suppliers to postpone the delivery of high-end chip-manufacturing equipment, with expectations that this delay will be of short duration.

What’s Next?

On the bright side, analysts predict a slight recovery for the first quarter of TCM’s next fiscal year, with a 10% expected growth.

Nevertheless, worries persist regarding the likelihood of order cancellations towards the year’s end, as well as the relatively modest restocking demand. The outcome of TSMC’s collaboration with its major customer, Apple, holds significant importance, and analysts express concerns about the potential for order adjustments by Apple.