- TSMC on Thursday reported third-quarter profit of NT$211 billion – its second straight quarter of profit decline – as demand for consumer electronics remains weak.
- Nevertheless, the company exceeded analysts’ expectations in terms of both sales and profits.
- The Taiwanese chipmaker is the world’s leading maker of the most advanced processors, but demand for consumer electronics has fallen sharply following the pandemic.
A man walks past the TSMC logo at the company’s headquarters in Hsinchu, Taiwan.
Sam Yeh | AFP | Getty Images
Taiwan Semiconductor Manufacturing Company reported third-quarter profit of 211 billion new Taiwan dollars ($6.69 billion) on Thursday as demand for consumer electronics remained weak. Although this was the second straight quarter of profit declines, the world’s largest contract chipmaker beat analysts’ expectations.
Here are TSMC’s third-quarter results compared to Refinitiv’s consensus estimates:
- Revenue: 546.73 billion new Taiwan dollars (US$17.28 billion), versus expected NT$540.39 billion
- Net income: NT$211 billion, versus expected NT$191.43 billion
TSMC reported that revenue fell 10.83% year-on-year to NT$546.73 billion, while net profit fell 24.87% year-on-year to NT$211 billion. This compares to TSMC’s forecast for third-quarter revenue of between $16.7 billion and $17.5 billion.
“Our business was supported by strong growth in our industry-leading 3-nanometer technology and higher demand for 5-nanometer technologies, partially offset by ongoing customer inventory adjustments,” TSMC said in its earnings report.
The chip giant said third-quarter revenue rose 13.7% compared to the second quarter.
In the second quarter, the Taiwanese company reported a decline in quarterly profit for the first time in four years as demand for consumer electronics such as smartphones and laptops collapsed following the pandemic. But analysts say inventories are running low at smartphone and computer makers and demand for inventory is expected to pick up.
During the earnings call on Thursday afternoon, CEO CC Wei said the company expects inventory to continue to decline.
“Due to the ongoing weaker overall macroeconomic situation and the slow recovery of demand in China, customers remain cautious about inventory control. Therefore, we expect inventory depletion to continue in the fourth quarter,” Wei said.
TSMC is the leading manufacturer of the world’s most advanced processors. The Taiwanese company makes semiconductors for companies like Apple and Nvidia, often based on the Arm architecture.
TSMC currently produces 3-nanometer chips and plans to begin 2-nanometer mass production in 2025.
Data from Canalys showed that the global smartphone market fell just 1% in the third quarter of 2023, indicating a slowdown in its decline. In the second quarter, the market fell 11% compared to the same period last year.
“Supported by regional recoveries and demand for new product upgrades, the smartphone market posted double-digit sequential growth in the third quarter ahead of sales seasons,” Canalys said in a report on Tuesday.
Demand for AI chips is booming, driven by the proliferation of large language models such as ChatGPT and Chinese clones. That has boosted shares of TSMC, which have risen 19% so far this year.
However, CEO Wei said that AI demand is “not enough to offset weak demand for chips in consumer electronics.”
“As we enter the fourth quarter of 2023, AI-related demand remains strong, but it is not sufficient to offset the overall cyclicality of our business,” Wei said during Thursday’s earnings call.
“We expect our business to be supported by continued strong growth in the fourth quarter [up] our 3-nanometer technology, partially offset by continued customer inventory adjustment on the warehouse side,” he said.
Last week, the US extended TSMC’s exemption from US trade sanctions against China, allowing the company to continue supplying advanced chip equipment for its operations there.
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