TSMC’s Third-Quarter Profit Expected to Decline, But Growth on the Horizon
Introduction
Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is set to report a 30% decrease in third-quarter profit, signaling a challenging period for the chip industry. However, analysts remain optimistic about the company’s future prospects, with robust growth predicted for next year as the industry rebounds from its current downturn.
Profit Decline and Strong Performance
TSMC’s expected profit decline reflects not only the current industry challenges but also the exceptional performance the company had last year, driven by pent-up post-pandemic demand. The world’s largest contract chipmaker is anticipated to report a net profit of T$195.9 billion ($6 billion) for the July-September period, marking its second consecutive quarter of profit decline.
Revenue and Restocking Demand
TSMC’s revenue for the quarter is estimated to be around $17 billion, a 20% decrease compared to the same period last year. The decline in global demand for semiconductors, which began in the second half of last year, has contributed to this decrease. However, analysts suggest that inventories at smartphone and computer manufacturers are now depleting, and restocking demand is expected to pick up in the near future.
Future Outlook and AI-driven Growth
Given the current market conditions, much of the focus will be on TSMC’s outlook for the fourth quarter and beyond. Analysts at Morgan Stanley have forecasted a 10% revenue growth for the fourth quarter, citing strong demand for high-end chips used in artificial intelligence as a contributing factor. The booming AI industry has also played a significant role in driving up TSMC’s stock price, making it Asia’s most valuable company with a 23% surge in its Taipei-listed shares this year.
Supplier Concerns and Analyst Predictions
Despite the positive outlook, there are some concerns regarding customer demand. TSMC has reportedly asked its major suppliers to delay the delivery of high-end chip-making equipment, possibly due to apprehensions about future demand. However, suppliers expect this delay to be short-term. Analysts at Fubon Securities predict a slow start for TSMC in the first quarter of next year, projecting 10% growth. They express concerns about potential order cancellations, particularly from major customer Apple, which may revise down its orders.
Conclusion
TSMC’s third-quarter profit decline reflects the challenging period faced by the chip industry, but analysts anticipate a brighter future as the industry recovers. With restocking demand expected to increase and strong growth forecasted for next year, TSMC is well-positioned to navigate the current downturn and capitalize on the AI-driven market.
