Apple, Nvidia Supplier TSMC Records 19% Q4 Profit Drop But Exceeds Market Expectations

The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd TSM, experienced a 19% decrease in its fourth-quarter net profit, largely due to the global economic downturn affecting chip demand. Despite this, the company’s performance exceeded market predictions.

What Happened: TSMC’s net profit for the October-December period fell to T$238.7 billion ($7.6 billion) from T$295.9 billion a year earlier, reported Reuters on Thursday. This drop, however, was less severe than the T$226.4 billion LSEG SmartEstimate, which is weighted towards forecasts from consistently accurate analysts.

Despite the decline, TSMC’s fourth-quarter revenue only slipped 1.5% year-on-year to $19.62 billion, in line with the company’s previous forecast of $18.8 billion to $19.6 billion. The company’s capital expenditure in the fourth quarter was $5.24 billion, down from $7.1 billion in the third quarter.

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For the full year, TSMC’s capital expenditure was $30.45 billion, less than the previous forecast of $32 billion for 2023 and a total of $36.29 billion spent in 2022.

Why It Matters: TSMC, as the leading producer of advanced chips, is facing an uncertain industry outlook and the U.S.-China chip dispute, which could potentially make it vulnerable. Despite these challenges, the company’s performance has been resilient, with its Taipei-listed shares surging 32% in the previous year.

Analysts have been closely monitoring TSMC’s performance, especially given its key role as a supplier to tech giants like Apple Inc AAPL and NVIDIA Corp NVDA. The company’s ability to navigate industry challenges and maintain its position as a leading chipmaker will have significant implications for the global tech industry.

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