TSMC Posts Second Consecutive Quarter of Profit Decline as Consumer Electronics Demand Weakens
Taiwan Semiconductor Manufacturing Company (TSMC) reported a third-quarter profit of 211 billion New Taiwan dollars ($6.69 billion) on Thursday, marking its second straight quarter of profit decline. The weak demand for consumer electronics continues to persist, impacting the world’s largest contract chipmaker.
Despite the profit decline, TSMC managed to surpass analyst expectations on both the top and bottom lines. The company’s revenue for the third quarter reached 546.73 billion New Taiwan dollars, beating the estimated 540.39 billion New Taiwan dollars. Net income, meanwhile, amounted to 211 billion New Taiwan dollars, higher than the expected 191.43 billion New Taiwan dollars.
Compared to the same period last year, TSMC’s revenue decreased by 10.83%, while net income fell by 24.87%. The ongoing inventory adjustment by customers, coupled with weaker overall macroeconomic conditions and slow demand recovery in China, contributed to these declines.
However, TSMC highlighted its strong ramp of the industry-leading 3-nanometer technology and increased demand for 5-nanometer technologies as factors buoying its business. The chip giant also noted a 13.7% increase in revenue during the third quarter compared to the second quarter.
During the earnings call, CEO C.C. Wei stated that TSMC expects inventories to continue declining in the fourth quarter due to customers’ cautious inventory control. Despite the decline, analysts predict that restocking demand for smartphones and laptops will likely pick up as smartphone and computer makers deplete their inventories.
TSMC, which manufactures semiconductors for companies like Apple and Nvidia, remains the top producer of the world’s most advanced processors. The firm currently manufactures 3-nanometer chips and plans to initiate 2-nanometer mass production in 2025.
Despite the weak demand for consumer electronics, AI chip demand has experienced a surge driven by the proliferation of large language models. TSMC’s shares have risen by 19% this year due to the increased demand for AI chips.
Nonetheless, CEO Wei emphasized that while AI-related demand remains strong, it is insufficient to offset the overall cyclicality of the business. TSMC expects its business in the fourth quarter to be supported by the continuous ramp-up of the 3-nanometer technology but anticipates customers’ ongoing inventory adjustment to impact the inventory side.
Last week, the United States extended TSMC’s exemption from trade sanctions on China, allowing the company to continue shipping advanced chip equipment for its operations there.
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