TSMC’s Resilience in the Face of Global Chip Challenges As Profit Plunges

Taiwan Semiconductor Manufacturing Company (TSMC) reported its third-quarter earnings, recording a profit of 211 billion New Taiwan dollars ($6.69 billion), while it faced ongoing challenges in consumer electronics demand.

This marked the most significant decline in profits since the first quarter of 2019. Nevertheless, the world’s largest contract chipmaker surpassed analysts’ predictions.

TSMC reported a 10.83% reduction in revenue from the previous year, totalling NT$546.73 billion, along with a 24.87% decline in net income to NT$211 billion. These figures compared to TSMC’s projected third-quarter revenue ranging from $16.7 billion to $17.5 billion.

TSMC attributed its performance to the robust adoption of their industry-leading 3-nanometer technology and rising demand for 5-nanometer technologies, somewhat offset by ongoing customer inventory adjustments.

The chip giant disclosed that revenue had risen by 13.7% in the third quarter when compared to the preceding quarter. In the second quarter, the Taiwanese company faced its first quarterly profit drop in four years due to a post-pandemic slump in consumer electronics demand, particularly for smartphones and laptops. Analysts, however, noted that chip inventories at smartphone and PC manufacturers were depleting, indicating a resurgence in restocking demand.

During the earnings call, CEO C.C. Wei expressed the company’s anticipation of a continued decrease in inventories.

He noted, “Due to the persistent weaker overall macroeconomic conditions and slow demand recovery in China, customers remain cautious in their inventory control. That’s why we expect the inventory digestion to continue in the fourth quarter. Having said that, we are observing some early signs of demand stabilization in the PC and smartphone market.”

TSMC holds the position of the world’s primary producer of advanced processors and provides semiconductors for prominent companies like Apple and Nvidia, often based on Arm architecture. The company is actively manufacturing 3-nanometer chips and has plans to commence mass production of 2-nanometer chips in 2025.