Analysis of TSMC's Q3 2023 Performance and Future Outlook
Good morning 🐯 community
Introduction:
In this analysis, we delve into TSMC's (Taiwan Semiconductor Manufacturing Company) Q3 2023 performance report, which was released on October 19, just before the U.S. stock market opened. TSMC is the world's largest semiconductor foundry and a crucial player in the global tech industry. The report reveals some critical insights into TSMC's performance, industry trends, and potential challenges.
I. Financial Analysis: Exceeding Expectations
- TSMC reported Q3 2023 revenue of 546.73 billion New Taiwan Dollars, a 10.8% decrease year-over-year, but it exceeded expectations. Notably, the quarter saw a significant 13.7% increase in revenue compared to the previous quarter, breaking a trend of three consecutive quarters of revenue decline.
- The breakdown of revenue sources showed a resurgence in the smartphone segment, with a 33% increase in revenue. High-Performance Computing (HPC) and IoT segments, which struggled in the previous quarter, also experienced significant quarter-over-quarter improvements.
- Although the net profit decreased by 24.9% year-over-year, it grew by 16.1% quarter-over-quarter. The profit advantage from advanced processes played a significant role. Each share earned 8.14 New Taiwan Dollars in this quarter.
- TSMC's gross margin for the quarter stood at 54.3%, slightly better than previous forecasts, driven by the increase in revenue share from advanced processes.
II. Operational Analysis: Advancing in Advanced Processes
1. Significant Growth in Advanced Processes:
- TSMC, as a global semiconductor leader, relies on its technological edge in advanced processes. The introduction of 3nm chips for Apple's new smartphones in this quarter marked a significant step. 3nm chip revenue accounted for 6% of total wafer revenue, 5nm chips contributed 37%, and 7nm chips, 16%. Collectively, advanced processes represented 59% of total wafer revenue.
- This growth in advanced processes over three consecutive quarters illustrates their ability to resist risk during a semiconductor industry downturn.
2. Semiconductor Market Turning Point:
- The quarter witnessed improvements in key revenue streams, including smartphones, HPC, and IoT, indicating stabilization in the semiconductor market.
- Data from various analysis agencies suggested slowing declines in PC and smartphone sales and even instances of improvement.
- TSMC's AI chip production for NVIDIA contributed to performance improvement and promised significant future growth. Despite AI chips' current low revenue share, growth prospects look promising.
3. Risks Due to New U.S. AI Chip Regulations:
- While the semiconductor industry's recovery appears evident, new, stricter U.S. export controls on AI chips could pose a risk.
- These regulations extend to a broader range of countries, potentially affecting sales of NVIDIA's AI chips to Taiwan. Given TSMC's involvement in the manufacturing of these chips, this could impact TSMC's AI chip segment and potentially delay its performance recovery.
- The unpredictability of future restrictions in the semiconductor industry is a considerable concern, given the broader trend toward deglobalization.
III. Technical Analysis:
- TSMC has faced challenges in recent years due to the semiconductor market downturn. However, the growth of AI chips driven by the current AI wave has positively affected its stock price.
- As the semiconductor industry's turning point draws near, TSMC's performance provides a critical outlook for the industry. Buying on dips could be a sound strategy.
IV. Conclusion:
In conclusion, TSMC's Q3 2023 performance signifies a turning point in its business cycle. The resurgence in revenue and optimistic guidance for the next quarter showcase renewed confidence. With the launch of Apple's new smartphones and the continuous demand for AI chips, TSMC appears well-positioned for future growth. However, challenges, particularly related to U.S. regulations, remain uncertain. Given TSMC's pivotal role in the semiconductor industry, it's a stock worth considering, especially as the industry's turning point appears imminent.$Taiwan Semiconductor Manufacturing(TSM)$
Thank you for reading! 😊
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On a serious note I’ve read a ton into this. First a foremost the entire market will collapse and it’ll be extremely heavy in tech. TSM obviously would crash like 70% but their main business partners like Apple will also feel the burn. Other semiconductor company’s can not make up the slack short and medium term which is immediately put a major supply problem throughout the industry effecting nearly anything with a chip in it….
Great ariticle, would you like to share it?
I'm afraid TSM will drop 90%