A woman walks past the TSMC logo at the Hsinchu Science Park on July 5, 2023. (Photo: Sam Yeh/AFP) (Photo: SAM Yeh/AFP, Getty Images)

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TSMCWorld’s largest chipmaker’s second-quarter profit falls sharply Demand for consumer electronics continued to decline on Thursday.

Here’s how TSMC’s second-quarter results compare to Refinitiv consensus estimates:

  • income: 480.84 billion NT$ ($15.68 billion), NT$478.83 billion expected
  • net income: NT$181.8 billion vs. NT$172.55 billion expected

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TSMC announced that its revenue fell 10% from the same period last year to NT$480.84 billion, and its net profit fell 23.3% from the same period last year to NT$181.8 billion. The company had previously forecast second-quarter revenue of between $15.2 billion and $16 billion.

TSMC said Business was impacted by macroeconomic headwinds that “suppressed end-market demand and led to ongoing inventory adjustments by customers.”

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

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

“Going into the third quarter of 2023, we expect our business to be supported by strong growth in 3nm technology, partially offset by customers’ ongoing inventory adjustments,” said Wendell Huang, TSMC’s chief financial officer.

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

The nanometer number refers to the size of each individual transistor on a chip. The smaller the transistor, the more transistors can be packed on a single semiconductor. In general, reductions in nanometer size can lead to more powerful and efficient chips.

However, the company’s repeated warnings about “inventory adjustments” could continue to weigh on revenue.

Restoration in progress?

TSMC is the top producer of the world’s most advanced processors, including chips used in the latest iPhones, iPads and Macs. But demand for consumer electronics has plummeted in the wake of the pandemic.

Global demand for laptops and smartphones has surged amid the Covid-19 lockdown, prompting smartphone and PC makers to stockpile chips. Now, as inflation rises, consumers cut back on purchases of those items, and the companies are grappling with excess inventory. This caused chip prices to fall.

TSMC’s largest customer Apple reported in May Overall sales fell for the second straight quarter.

Global Smartphone Market Plummeted 11% in the second quarter That’s compared with a year ago, according to a report Tuesday from data insights provider Canalys.

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

“The smartphone market is showing early signs of recovery after six consecutive quarters of decline since 2022,” said Le Xu, an analyst at Canalys. “Smartphone inventories have already begun to clear, as smartphone suppliers prioritized reducing inventories of older models to make room for new product launches.”

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