TSMC Anticipates 27% Decline in Q2 Net Profit amid Global Economic Challenges

Leading global contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is expected to announce a 27% decline in net profit for the second quarter of this year, as the ongoing global economic challenges continue to impact the demand for semiconductors. Analysts remain optimistic about the company’s future performance, however, and expect an improvement in the current quarter.

According to a Reuters poll of 21 analysts, TSMC is projected to report a net profit of T$172.53 billion ($5.58 billion) for the April-June period, down from T$237.0 billion recorded in the same period last year. This anticipated decline can be attributed to several factors, including the exceptional performance TSMC had experienced in the previous year, driven by strong post-pandemic demand.

Despite the projected decline, analysts at Fubon Investment in Taiwan believe that the second quarter represents the low point of the current downcycle. While the market professionals expect an improvement in the third quarter, it is likely to be weaker than usual due to ongoing inventory build-ups that are still being addressed within the industry.

Industry experts, however, remain optimistic about TSMC’s future prospects. As a major supplier to Apple and Nvidia, the company anticipates a rebound in profitability, driven by the growing demand for artificial intelligence (AI) applications and the upcoming release of the new iPhone 15 ahead of the year-end holiday shopping season. Unlike the electric vehicle (EV) market, where TSMC has had limited exposure, the increasing demand for AI presents a promising opportunity for the Taiwanese chipmaker, especially considering Taiwan’s comprehensive AI supply chain.

The second quarter is traditionally a slow period for many companies in the tech industry, with sales typically picking up in the third quarter and leading into the year-end shopping season. TSMC, being Asia’s most valuable listed company, experienced a surprise rise in net profit in the first quarter of this year. However, this growth was the smallest since mid-2019, mainly due to global economic challenges affecting chip demand.

Despite the hurdles, TSMC remains positive about the future as the demand for AI applications continues to rise steadily. This optimistic outlook has boosted the company’s stock performance, with its shares on the Taipei-listed stock exchange surging by almost 30% year-to-date, outperforming the broader market.

TSMC is scheduled to provide guidance for the third quarter and update previous forecasts during its earnings call on Thursday at 06:00 GMT. In the second quarter, the company recorded revenue of T$480.8 billion ($15.53 billion), within the April forecast range of $15.2 billion to $16 billion. The impressive financial report was driven by an increase in AI tools and applications. The latest figure compares to the revenue of $18.16 billion achieved in the same period last year.

As TSMC navigates the evolving semiconductor landscape, industry stakeholders eagerly await the company’s financial updates and future projections, hoping for a more favorable business environment in the coming months.