TSMC announced a NT$211 billion profit for the third quarter on Thursday, a decrease for the second consecutive quarter due to weakened demand for consumer electronics. Despite this, the figures exceeded the estimates from analysts in terms of both revenue and profit. The leading manufacturer of processors saw a drop in consumer electronics purchases after the pandemic.
Taiwan Semiconductor Manufacturing Company (TSMC) announced on Thursday that their third quarter profit amounted to 211 billion New Taiwan dollars (NT$) ($6.69 billion), which surpassed analyst estimates despite the weak demand for consumer electronics. The world's largest contract chipmaker reported that revenue declined 10.83% year-on-year to NT$ 546.73 billion while net income dropped 24.87% to NT$ 211 billion. This figure fell within the company's projected guidance of NT$16.7 to 17.5 billion. TSMC attributed this decline to inventory adjustments among customers, businesses being supported by their 3-nanometer and 5-nanometer technology, and a 13.7% increase in revenue from the second quarter. The Taiwanese firm had encountered their first quarterly profit drop in four years in the second quarter of 2020, presumably due to the pandemic causing a plunge in customer electronics. However, analysts believe that chip demands from smartphone and PC makers will rise again as inventories are running low.
At Thursday's earnings call, C.C. Wei laid out the company's expectation that inventories will keep decreasing. "Given the sustained weaker macroeconomic state, along with feeble recovery in demand from China, customers remain wary about controlling their inventories. So our outlook is that stock consumption will remain the same in the fourth quarter," he mentioned. Wei then noted, "However, we are beginning to recognize indications of stabilization in the PC and cellphone market."TSMC is the number one producer of advanced processors globally. It manufactures chips for companies like Apple and Nvidia, usually featuring Arm architecture. The Taiwanese firm is producing 3-nanometer chips at present and plans to initiate 2-nanometer mass production in 2025.
Canalys data indicated a slight decrease in the global smartphone market during the third quarter of 2023, less severe than the 11% dip seen during the previous quarter. Additionally, the report from Canalys specified that a regional economic recovery and demand for modern devices has caused a double-digit sequential growth leading up to the sales seasons.
The growth of big language models like ChatGPT and Chinese clones has caused the demand for AI chips to skyrocket, resulting in a 19% raise for TSMC shares this year. Nonetheless, CEO Wei has stated that this demand is "not sufficient to offset" the declining demand in customer electronics. On the earnings call on Thursday, Wei explained that although there has been a continuous strong ramp up of 3-nanometer technology, it is "not enough to counter the business’ cyclicality". According to the CEO, TSMC’s fourth quarter revenue will likely lay between $18.8 billion and $19.6 billion. Recently, the U.S. has prolonged TSMC’s exemption from the Chinese trade sanctions, granting it the ability to deliver advanced chip equipment there.
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