Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, has forecasted a 10 percent drop in its 2023 sales in the face of challenging global economic conditions and rising inflationary costs.
The company estimated its investment spending for the current year to be at the lower end of its previous guidance of $32-$36 billion.
TSMC has reported second quarter revenue of $15.68 billion (–13.7 percent) and net profit of $5.85 billion (–23.3 percent) with gross margin of 54.1 percent, operating margin of 42 percent and net profit margin of 37.8 percent in Q2 2023.
While this drop in net profit marks the first on-year decline since Q2 2019 when it fell 7.6 percent, TSMC’s Q2 performance still exceeded market forecasts.
Despite the projected decline in annual sales, TSMC remains optimistic about its third-quarter revenue, expecting it to rebound to approximately $16.7 billion-$17.5 billion. This represents a notable increase from the $15.68 billion reported in the previous quarter. The chipmaker attributes the anticipated improvement to robust demand for its advanced 3nm technology.
“Our second quarter business was impacted by the global economic conditions, which dampened the end market demand, and led to customers’ ongoing inventory adjustment,” said Wendell Huang, Chief Financial Officer of TSMC. “Moving into third quarter 2023, we expect our business to be supported by the strong ramp of our 3-nanomenter technologies, partially offset by customers’ continued inventory adjustment.”
However, TSMC faces certain challenges in its expansion plans. The company is currently grappling with a shortage of skilled workers at its fabrication plant in Arizona, leading to a delay in production for its N4 technology, now scheduled for 2025.
Nevertheless, TSMC remains committed to its long-term growth strategy and has started constructing a second chip factory in Arizona. This new facility, using advanced 3nm technology, will begin production in 2026, with a significant investment of $40 billion in the United States.
TSMC’s importance as a key supplier for tech giant Apple has contributed significantly to its prominence in the industry. The company’s innovative chip technology and ongoing investment in advanced production facilities position it as Asia’s most valuable listed company, despite the challenges faced during the second quarter of 2023.
As the global semiconductor industry navigates uncertainties and adapts to changing economic conditions, TSMC’s strategic investments and technological advancements continue to be closely watched, not only for their impact on the company but also for their implications on the broader technology landscape.