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TSMC expects ‘healthy growth year’ as Q3 profit beats expectations


Despite surpassing predictions, Taiwanese chipmaker TSMC (2330. TW) reported a 25% decline in third-quarter net profit on Thursday and said the semiconductor sector could be ready for a turnaround.

The largest contract chip manufacturer in the world anticipated strong growth and a decrease in stock levels in the sector for the coming year.

The rebound is anticipated to be led by demand for personal computers and smartphones, two of TSMC’s key revenue generators, with the expansion of artificial intelligence (AI) also driving demand for its advanced chips and advanced packaging.

According to CEO C.C. Wei, the firm anticipates having a “healthy growth year in 2024” and performing “better than the overall industry” in that time frame.

Inventory controls have become “more healthy than we thought,” demand in the PC and smartphone end markets has stabilized in the last several months.

“Do we now see the bottom? Very close,” Wei said, adding that it was still too early to predict how robust the comeback would be due to clients’ continued skepticism and China’s delayed economic recovery.

Investors have been waiting for clues to determine the extent of any rebound after TSMC’s tool supplier ASML (ASML.AS) issued a warning about flat 2024 sales on Wednesday, citing chipmakers’ hesitation in making fresh investments.

TSMC stated that it had “appropriately tightened” its capital investment for this year to roughly $32 billion in light of the ongoing uncertainties. The $7.1 billion in capital expenditures for the three months ending in September was a 13% decrease from the prior quarter.

Samsung Electronics Rival

The IT heavyweight’s third-quarter results topped forecasts, and earlier this month, rival Samsung Electronics (005930. KS) also posted better-than-anticipated quarterly profits.

Major Apple (AAPL.O) and Nvidia (NVDA.O) supplier Taiwan Semiconductor Manufacturing Co Ltd (TSMC) said the July-September net profit decreased to T$211 billion from T$280.9 billion a year earlier.

The gain exceeded a T$195.5 billion LSEG SmartEstimate, which gives more weight to expert estimates that are more reliably correct. The most valuable publicly traded business in Asia, TSMC, reported a 14.6% decline in third-quarter sales to $17.3 billion, in line with the firm’s prior expectation of $16.7 billion to $17.5 billion.

High-end AI chips are included in the high-performance computing category, which contributed 42% of the company’s total sales in revenue, down from 44% in the previous quarter but up from 39% a year earlier.

Wei attributed the car sector’s downturn to the industry rebalancing inventories after three years of “very strong” demand, which caused the segment to shrink to 5% from 8% the previous quarter. As more electric vehicles enter the road, he predicted that demand will increase in the upcoming year.

As the top producer of sophisticated chips, TSMC must negotiate an unclear market picture and a chip spat between the United States and China that might expose it.

The business has had considerable client interest in its 2-nanometer technology, which will be its most advanced and energy-efficient, said Wei. “The recent surge in AI-related demand supports our already strong conviction that demand for energy-efficient computing will accelerate,” he said.

Wei predicted that while TSMC develops cutting-edge technology, the cost will be the biggest obstacle as chip manufacturing equipment prices rise due to inflation.

“I want to reduce cost so that more customers could afford it,” he stated.

The market capitalization of TSMC, a chipmaker, is $432.3 billion after shares of the Taipei-listed company rose 22% so far this year after falling 27.1% in 2022. On Thursday, the stock increased 1.1% compared to a flat benchmark index (.TWII).

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