Taiwan Semiconductor Manufacturing Company Ltd (TSMC), listed as Taiwan Semiconductor on the NYSE, experienced a decline in its stock price after reporting its second-quarter earnings. The company’s revenue for Q2 fell by 13.7% year-on-year to $15.68 billion, although it managed to surpass the consensus estimate of $15.49 billion.
In terms of wafer revenue, TSMC’s shipments of 5 nm technology accounted for 30% of the total, while 7 nm technology made up 23%. Collectively, advanced technologies (7 nm and more advanced) comprised 53% of the total wafer revenue.
TSMC’s earnings per share (EPS) of $1.14 exceeded the consensus estimate of $1.08. However, the gross margin contracted by 500 basis points to 54.1% due to lower capacity utilization and higher electricity costs. The operating margin also declined significantly by 710 basis points to 42%. TSMC held approximately $47.9 billion in cash and equivalents.
The VP and Chief Financial Officer of TSMC, Wendell Huang, attributed the second-quarter business impact to global economic conditions affecting end-market demand and customers’ ongoing inventory adjustment. Looking ahead to the third quarter of 2023, TSMC anticipates business support from the strong ramp-up of its 3-nanometer technologies, although this may be partially offset by customers’ continued inventory adjustment.
TSMC expects its Q3 revenue to range between $16.7 billion and $17.5 billion, compared to the consensus estimate of $17.68 billion. The company also forecasts a gross margin of 51.5% to 53.5% and an operating margin of 38% to 40%.
In other news, TSMC revealed that the production schedule for its planned facility in Arizona has been postponed from late 2024 to 2025. This delay is a result of efforts by the US government to establish a more robust chip industry.
As of premarket trading on Thursday, TSMC’s stock had fallen by 3.32% to $99.64.
Overall, TSMC’s second-quarter earnings showed a decline in revenue but still managed to surpass expectations. Despite the challenging global economic conditions and ongoing inventory adjustments, the company remains optimistic about the ramp-up of its 3-nanometer technologies in the third quarter. However, the postponement of production in Arizona reflects external influences shaping the chip industry landscape.
