TSMC’s Q2 earnings drop 27% YoY, Q3 looks better

By Faith Hung and Ben Blanchard

TAIPEI (Reuters) – Taiwanese chipmaker TSMC is expected to report a 27% drop in second-quarter net profit on Thursday, as demand for semiconductors falters as a result of the global economic slowdown. although analysts think business performance is likely to improve in the current quarter.

Taiwan Semiconductor Manufacturing Co., Ltd (TSMC), the world’s largest contract chipmaker and a major supplier to Apple and Nvidia, is likely to report a net profit between May and March. April through June was NT$172.53 billion ($5.58 billion), down from NT$237.0 billion a year earlier, according to an average of 21 analysts polled by Reuters.

The reduced profit forecast partly reflects strong operating results in the previous year, when the company was still growing on the back of pent-up demand after the pandemic.

Analysts at Taiwan’s Fubon Investment said they expect the second quarter to be the bottom of the current bear cycle but although the situation should improve in the third quarter, it will be weaker than usual due to inventories. Inventory continues to accumulate and is still being processed.

A senior Taiwanese fund manager told Reuters that third-quarter profits will rebound on expectations of AI demand and new iPhone launches ahead of the year-end shopping season.

“Taiwan doesn’t really benefit from electric vehicles, as the market is in China and most EV suppliers are in China. But artificial intelligence (AI) is a different story,” he said. The request for anonymity cited company policy. “Taiwan will benefit the most from AI as the entire AI supply chain can be found here.”

The second quarter has traditionally been a period of slow sales for the tech industry with demand typically picking up in the third quarter and heading into the year-end shopping season.

TSMC, Asia’s most valuable listed company, unexpectedly posted an increase in net profit for the quarter ended March, up 2% from a year earlier. But that was still the smallest quarterly growth since mid-2019 as the global economic crisis hit chip demand.

Last month, the company said that rapidly increasing demand for AI applications has driven a lot of orders, and it expects performance in the second half to be better than in the first half.

Bright prospects for AI applications have partly boosted TSMC’s Taipei-listed shares up nearly 30% this year, outperforming the broader market, which is up about 22%.

The company will provide guidance for the third quarter and update previous forecasts on the earnings call at 06:00 GMT on Thursday.

TSMC’s second-quarter revenue hit NT$480.8 billion ($15.53 billion), according to Reuters calculations, in the middle of the April forecast range of $15.2 billion to $16 billion, compared with $18.16 billion. USD of the same period last year.

($1 = NT$30,9600)

(Reporting by Faith Hung and Ben Blanchard; Editing by Shri Navaratnam)


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