TSMC

In the face of a bright future, TSMC's Q3 profit decline was only a temporary setback

On Thursday, Taiwan Semiconductor Manufacturing Co Ltd (2330. TW) is anticipated to post a third-quarter profit down 30%, but analysts anticipate strong growth in 2014 as the chip industry recovers from its present slump. A good performance last year, when the business was still riding high on pent-up post-pandemic demand, is also reflected in the expected fall in profit.

According to an LSEG SmartEstimate compiled from 19 analysts, the largest contract chipmaker in the world is expected to announce a net profit of T$195.9 billion ($6 billion) for the three months ending in September, marking its second consecutive quarter of profit lossSmart estimatesgiveves more weight to analyst projections that are more reliable over time.

According to TSMC data, revenue for the quarter came in at about $17 billion, about in the center of the company's expected range and down 20% from a year earlier. Analysts claim that although inventories at computer and smartphone manufacturers are running low and restocking demand is anticipated to rise, the global market for semiconductors started to decline in the second half of last year. Given this, TSMC's outlook for the fourth quarter and beyond will receive a lot of attention on Thursday.

The fourth quarter's sales growth is expected to increase by 10%, but Morgan Stanley analysts cautioned in a research note that "guidance may surprise to the upside," citing, among other things, the high demand for advanced chips used in artificial intelligence. The price of shares in Asia's most valuable firm has increased thanks to the AI boom, with TSMC's Taipei-listed stock rising 23% so far this year.

TSMC's revenue growth for 2024 is estimated by LSEG SmartEstimate to be around 22%. However, sources said that TSMC was concerned about client demand and instructed its main suppliers to postpone the delivery of advanced chip-making machinery, albeit they noted that suppliers anticipate the delay to be brief. Additionally, some analysts are considerably tempering their excitement.

Fubon Securities predicts that TSMC will have a slow start to the new year, with 10% growth in the first quarter, order cancellations toward the end of the year, and little restocking demand. It is particularly concerned that a significant customer, Apple (AAPL.O), may reduce its orders.