What’s wrong with Tsmc
TSMC's profit and revenue in the first quarter of 2024 beat expectations. Yet its shares drop by almost 7 percent: between a sluggish market and a "dying" globalization, the chip giant has many challenges to face. All the details
In the first quarter of 2024, the Taiwanese company TSMC, the world's largest contract semiconductor manufacturer, reported results well above expectations: thanks to the robust demand for advanced microchips, in particular those necessary for artificial intelligence systems. However, the company's shares lost about 7 percent today on the Taipei stock exchange due to less than encouraging forecasts on future demand for these electronic components.
TSMC's client list includes major companies that develop semiconductors, such as Nvidia , and large technology companies such as Apple.
All the details.
TSMC RESULTS IN THE FIRST QUARTER OF 2024
For January-March 2024, TSMC reported net revenue of NT$592.6 billion (US$18.8 billion), compared to analysts' estimate of NT$582.9 billion. Net profit was 225.4 billion, against the 213.5 billion expected.
On an annual basis, net sales grew by 16.5 percent and net profit by 8.9 percent.
FORECASTS FOR THE SECOND QUARTER
For the second quarter of the year, TSMC management expects strong demand for three and five nanometer chips (simplifying: the smaller the size, the more powerful and efficient the chip), which will however be "partially offset" by the " continued seasonality" of the smartphone market. In fact, smartphone manufacturers – but also computers – have accumulated large quantities of chips during the pandemic to protect themselves from logistical hitches; now, however, they find themselves with a surplus of components and a demand for devices no longer at the levels of the COVID period.
TSMC's expected revenue for the second quarter of 2024 is between US$19.6 billion and US$20.4 billion.
The company currently produces three-nanometer microchips, but plans to begin mass manufacturing two-nanometer devices in 2025.
WHAT THE ANALYSTS SAY
Tsmc continues to have a dominant position in the global foundry sector – that is, the microchip manufacturing phase – with a share of more than 60 percent, according to Counterpoint calculations. In second place is the South Korean Samsung Foundry, with a market share of 14 percent.
According to analysts at Conotoxia, TSMC's current net profit margin, at 40 percent, is one of the highest in the company's history and is well higher than the industry average, at 14 percent. Such a high margin is due to the sale of small chips, which, given their complexity, have high margins.
STOCKS FALL
Today Tsmc shares on the Taipei stock exchange lost 6.7 percent because the company, contrary to expectations, has not revised its spending plans upwards despite forecasting an increase in sales of up to 30 percent more in the second quarter of 2024.
In short, for this year the Taiwanese company plans to invest between 28 and 32 billion dollars. And he also thinks that despite the demand for microchips for artificial intelligence, the overall growth of the sector will not be exciting.
ALL THE CHALLENGES FOR TSMC, ACCORDING TO MORRIS CHANG
But the challenges for Tsmc are many. According to its founder, Morris Chang, the company must be able to navigate a "dying" globalization after having always benefited greatly from the opening of international trade. “TSMC also faces resource challenges,” he added: “land, water, energy, talent.”
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/tsmc-risultati-primo-trimestre-2024/ on Fri, 19 Apr 2024 12:48:27 +0000.