Taiwan Semiconductor Manufacturing Company (TSMC), a leading global contract chipmaker, reported a Q3 net income of NT$211 billion ($6.69 billion) on Thursday, surpassing analyst forecasts despite consecutive quarters of profit declines. The firm’s revenue for the period was NT$546.73 billion ($17.28 billion), exceeding the projected NT$540.39 billion, but marking a year-on-year decrease of 10.83%. Net income fell by 24.87% compared to the same period last year.
This performance was bolstered by the successful ramp-up of TSMC’s industry-leading 3-nanometer technology and increased demand for 5-nanometer technologies. This offset customer inventory adjustments in the wake of a post-pandemic slump in consumer electronics demand, leading to a revenue increase of 13.7% compared to Q2.
TSMC’s market capitalization stands at a robust 441.09B USD with a P/E ratio of 14.8, reflecting its strong position in the industry. The company’s revenue growth in the last twelve months (LTM2023.Q2) was 18.64%.
TSMC, which manufactures semiconductors for Apple and Nvidia based on Arm architecture, currently produces 3-nanometer chips and has plans for mass production of 2-nanometer chips in 2025. As inventories at smartphone and computer manufacturers are depleted, restocking demand is expected to surge. This is reflected in the company’s high return on assets of 20.34% (LTM2023.Q2).
The company invested $25.2 billion in capacity expansion during the first three quarters of this year, suggesting that its total capital spending for 2023 might reach the lower end of its projected $32-36 billion range. As a primary supplier of AI accelerator chips for Nvidia Corp . (NASDAQ:NVDA), TSMC has experienced a surge in demand following the launch of ChatGPT, resulting in its production capacity being expected to be stretched until 2024.
Potential challenges lie ahead. U.S. restrictions on AI chip sales to China could impact TSMC’s orders from U.S. companies such as Nvidia. Additionally, a significant drop in Q3 order bookings by ASML Holding NV (AS:ASML), one of TSMC’s largest customers, suggests potential capital expenditure cuts by the chipmaker.
TSMC also produces iPhone chips for Apple Inc (NASDAQ:AAPL)., with demand potentially influenced by economic downturns and China’s uneven recovery from Covid. Despite these challenges, Murata Manufacturing Co (OTC:MRAAY). anticipates a resurgence in the smartphone market this year.
On a positive note, TSMC has consistently increased its earnings per share and has maintained dividend payments for 20 consecutive years, offering some reassurance to investors.
