TSMC may be the world’s largest foundry and counts Apple as its biggest customer, but that doesn’t mean it’s guaranteed to report rising profits every quarter. The company announced today that it made a profit of NT$211 billion ($6.69 billion) in the third quarter. This is a year-over-year decline of 24.87% and the largest annual decline in five years. Revenue also declined to NT$546.73 ($17.28 billion), down 10.83% on a year-over-year basis.
According to
CNBC, both figures beat Wall Street’s expectations of NT$540.39 billion in revenue and NT$191.43 billion in net profit. As a result, on the New York Stock Exchange today, TSMC shares rose $3.75, or 4.19%, to $93.29, with less than an hour before the final bell rang. On a sequential basis, revenue increased 13.7% in the third quarter compared to the second quarter.
In the second quarter, TSMC reported a decline in profits for the first time in four years as consumers continued to slow their purchases of consumer electronics devices. This has been a trend since the pandemic began to ease. However, analysts say smartphone makers and other producers are ready to replenish their chip stocks, which should lead to a rebound.
TSMC announced its biggest profit drop in five years
We wonder how much of a role Foundry’s sweetheart deal with Apple played in TSMC’s third-quarter financial results. Normally, the company whose chip design will be used by a foundry to make a chip is responsible for the costs of all dies made, even those that turn out to be defective. But this year, TSMC agreed to cover the costs of any defective chips produced using Apple’s designs for the A17
Pro SoC. The latter was the first smartphone chip built using a 3nm process node. The amount of money Apple saved this year could have been in the billions.
In its report, TSMC said: “Our business was supported by strong progress in our leading 3-nanometer technology and higher demand for 5-nanometer technologies, partially offset by continued customer inventory adjustments. . » While TSMC will use its second-generation 3nm node (N3E) to produce cutting-edge chips for more customers next year, Apple has reserved all of TSMC’s manufacturing capacity on this node (N3B) this year.
Knowing that TSMC would take the hit if returns were low surely helped Apple make the decision to do so. Currently, the only smartphones using 3nm AP are the
iPhone 15 Pro and iPhone 15 Pro Max.
TSMC CEO CC Wei commented on the earnings report and said: “Due to continued weak overall macroeconomic conditions and slow recovery of demand in China, customers remain cautious in their inventory control . Therefore, we expect inventory digestion to continue in the fourth quarter. That said, we are seeing some early signs of stabilizing demand in the PC and smartphone market. »
