TSMC’s earnings report for the second quarter of 2023

Taiwan Semiconductor Manufacturing Co., the world’s largest chip maker, posted a profit decline in the second quarter. Thursday as demand for consumer electronics continues to decline.

Here are TSMC’s second-quarter results versus Refinitiv consensus estimates:

• he won: 480.84 billion The new Taiwan dollar ($15.68 billion) vs. the expected 478.83 billion Taiwan dollars
• net income: NT$181.8 billion vs. NT$172.55 billion expected

TSMC reported that revenue fell 10% from a year ago to NT$480.84 billion, while net income fell 23.3% from a year ago to NT$181.8 billion. The company had previously forecast second-quarter revenue of between $15.2 billion and $16 billion.

TSMC said The business was affected by macroeconomic headwinds “which reduced final market demand, and led to continuous inventory adjustment for customers.”

This is the company’s first quarterly decline in net income since the second quarter of 2019.

TSMC expects third-quarter revenue to be between $16.7 billion and $17.5 billion.

“Going into the third quarter of 2023, we expect our business to be supported by the strong scaling of our three nanocenter technologies, partially offset by continued inventory adjustment for customers,” said Wendell Huang, CFO of TSMC.

TSMC makes chips for Apple’s iPhones. It is rumored that Apple’s next processor for its iPhone will be based on 3nm process technology. Apple usually releases its latest iPhone in September, so it’s likely to order chips from TSMC in the third quarter.

The nanometer figure indicates the size of each individual transistor on a chip. The smaller the transistor, the more of it can be packed into a single semiconductor. Normally, nanometer size reduction can lead to more powerful and efficient chips.

However, the company’s repeated warning about “adjusting inventory” will likely continue to weigh on revenue.

TSMC is the world’s largest producer of the most advanced processors, including the chips in the latest iPhones, iPads and Macs. But consumer electronics demand fell after the pandemic.

Global demand for laptops and smartphones has soared during the Covid-19 lockdowns, prompting smartphone and PC makers to stockpile chips. Now these companies are grappling with excess inventories as consumers have reduced their purchases of these goods due to rising inflation. This has led to lower chip prices.

In May, Apple, TSMC’s largest customer, reported a decline in total sales for the second straight quarter.

global smartphone market It fell 11% in the second quarter compared to last year, according to a report published on Tuesday by data analytics provider Canalys.

But Canalys said there are signs that the smartphone market is recovering.

“The smartphone market is sending early signs of recovery after six consecutive quarters of decline since 2022,” said Lu Xuanqiu, an analyst at Canalys. “Smartphone inventory has begun to clear up as smartphone vendors have prioritized reducing inventory of older models to make room for new launches.”