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Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is poised to reveal a 30% drop in third-quarter profits on Thursday, but industry experts are optimistic about a robust resurgence in the chip sector. The anticipated decline in profit can be partly attributed to TSMC’s stellar performance in the previous year, driven by pent-up post-pandemic demand.
As the world’s largest contract chipmaker, TSMC is projected to post a net profit of T$195.9 billion ($6 billion) for the period spanning July to September. This marks the second consecutive quarter of profit reduction, as per an LSEG SmartEstimate derived from the analysis of 19 experts, who have a track record of more accurate forecasts.
TSMC’s revenue for this quarter stood at approximately $17 billion, a 20% decrease compared to the same period the previous year. However, it lies within the company’s anticipated range.
Global semiconductor demand started to wane in the latter half of the prior year, but the outlook is improving. Analysts anticipate restocking demand, as smartphone and computer manufacturers are depleting their inventories.
Consequently, the focal point for Thursday’s report will be TSMC’s outlook for the fourth quarter and beyond. Morgan Stanley analysts anticipate a 10% revenue boost for the upcoming quarter and suggest that TSMC might deliver guidance exceeding expectations. They point to robust demand for high-end chips used in artificial intelligence as a driving factor.
The rise of artificial intelligence has notably elevated Asia’s most valuable company’s stock prices, with TSMC’s shares listed in Taipei experiencing a 23% surge this year.
An LSEG SmartEstimate projects TSMC’s revenue growth for 2024 to be approximately 22%.
However, there have been reports suggesting TSMC’s unease about customer demand, leading the company to instruct its major suppliers to postpone the delivery of high-end chip-making equipment. Nonetheless, these delays are expected to be short-term in nature, according to insiders.
While optimism prevails, some analysts are slightly tempering their expectations. Fubon Securities foresees a slow start to the next year for TSMC, with a 10% growth rate expected in the first quarter. They express concerns about potential order cancellations towards year-end and moderate restocking demand. In particular, they are apprehensive about the possibility of Apple, a significant TSMC customer, revising down its orders.
