TSMC Set to Navigate Q4 Profit Dip of 23%, Anticipates Strong Rebound in 2024 Amid Surging Demand

As Taiwan Semiconductor Manufacturing Co Ltd (TSMC) gears up to unveil its fourth-quarter financial report, analysts anticipate a 23% decline in profit, reflecting a temporary dip but forecasting robust growth in the coming year. The world’s largest contract chipmaker, catering to tech giants like Apple and Nvidia, is poised to showcase the impact of evolving global demand on its financial landscape.

Q4 Profit Outlook: Navigating the Downturn

Analysts predict TSMC’s net profit for the October to December 2023 period to be T$226.4 billion ($7.21 billion), marking a 23% decrease compared to the same quarter in the previous year. This anticipated decline follows a stellar performance in 2022, fueled by heightened demand following the initial wave of the COVID-19 pandemic.

Context of 2022: A Year of Highs and Pent-Up Demand

In 2022, TSMC experienced robust growth as post-pandemic demand soared. The company played a pivotal role in meeting the semiconductor needs of industry giants like Apple and Nvidia, contributing to its impressive financial performance.

Revealing Q4 Figures: A Snapshot of Revenue and Expectations

TSMC’s revenue for the final quarter of 2023 is expected to be T$625.5 billion ($20.10 billion), showcasing a year-over-year increase from $19.93 billion. Despite the decline in profit, the revenue figure surpasses both company and market expectations, providing insights into the resilience of TSMC’s operations.

Outlook for 2024: Rebounding Demand Takes Center Stage

As global semiconductor demand witnessed a slowdown in the latter half of 2023, TSMC’s focus now shifts to restocking demand and the overall outlook for 2024. Analysts emphasize that inventories at smartphone and computer manufacturers are depleting, signaling an impending resurgence in demand for semiconductor components.

Apple’s Role in the Equation: A Steady Contributor

Analysts from Fubon Securities alleviate concerns by asserting that Apple’s wafer demand remains steady in the short term. While a seasonal slowdown is anticipated in the first quarter of 2024, no additional order cuts have been observed, providing a positive indicator for TSMC’s near-term performance.

Tech Trends Shaping Growth: AI, 5G, and High-Performance Computing

KGI Securities analysts project a robust first-quarter performance, outperforming typical seasonal slowdown patterns. For the full year, they anticipate mid-20% top-line growth in U.S. dollar terms, attributing this growth to demand recovery and the increasing significance of silicon content driven by 5G and high-performance computing applications.

Market Sentiment: TSMC’s Stock Surge and Broader Market Dynamics

In 2023, TSMC’s Taipei-listed stock experienced a remarkable surge of 32%, outpacing the broader market’s 27% gain. This uptrend reflects the market’s recognition of TSMC’s pivotal role in the evolving tech landscape.

Anticipation and Timing: TSMC’s Scheduled Report Release

All eyes are on TSMC as it prepares to release its financial report on Thursday at 0600 GMT. As the tech giant navigates the current economic landscape, the market awaits insights into its strategic initiatives, partnerships, and plans to leverage rebounding demand in the semiconductor industry.

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Credit:  Ben Blanchard

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