By
Bhushan Akolkar
October 19th, 2023
Reporting a plunge in its Q2 2023 profit, TSMC highlighted that net revenue for the quarter was NT$480.84 billion. This is a 5.5% decrease from the first quarter’s figures which was NT$508.63.
The drop in the demand for electronics has caused Taiwan Semiconductor Manufacturing Company (TSMC) to experience its first profit decline in the last four years, in Q2 2023. The company is a top manufacturer of advanced processors, which soared in demand during the global lockdown. While people were forced to stay home, workers needed to work from the comfort of their homes but needed the required gadgets for continued productivity.
Hence, the sales of computers and other electronics advanced, and TSMC saw massive products due to high requests for its processors. There were significant purchases of laptops and smartphones, which made stores and supermarkets stockpile chips. Post-pandemic is here and many of these companies are now struggling with excesses as consumers cut back on buying these goods. Apart from the restrictions on life and gradual return to normalcy, the rising inflation has also impacted citizens’ pockets. People now spend more on essentials like food, other than electronics.
TSMC Sees First Profit Drop in 4 Years in Q2 2023
Reporting a plunge in its Q2 2023 profit, TSMC highlighted that net revenue for the quarter was NT$480.84 billion. This is a 5.5% decrease from the first quarter’s figures which was NT$508.63. According to TSMC, the Q2 revenue fall resulted from the overall global economic condition. The company explained that the financial situation filled the low demand and caused the consumer’s present inventory adjustment. The second-quarter net revenue dropped 10% from NT$534.14 billion in Q2 2022. The manufacturer attributed 6% of its total net revenue to its consumers in North America. TSMC also mentioned that China accounted for 12% of the total net revenue in Q2 2023. Other regions that contributed to the total net revenue are Asia Pacific (8%), EMEA (7%), and Japan (7%). Notably, the last time TSMC reported a net income decline before Q2 2023 was Q1 2019.
Furthermore, TSMC revealed that its operating margin was 42%, falling 3.5% points from Q1 2023 and 7.1% points from Q2 2022. TSMC also reported in the Q2 2023 financial results that its gross margin went lower by 2.2% percentage points to 54.1%. Gross profit was 2.2% points to 54.1%.
Canalys, data insights provider, said the global smartphone market declined 11% in Q2 compared to the same period in 2022, another emphasis on the current difficult time at TSMC. The semiconductor manufacturer’s biggest customer, Apple (NASDAQ: AAPL), noted that sales dropped during its second-fiscal quarter earnings for the second quarter. However, Canalys pointed to some signs of recovery in the smartphone market. If the data insights provider is correct, TSMC could be looking at some better days ahead.