The stock of Taiwan Semiconductor Manufacturing Co., the largest contract chip manufacturer in the world, fell more than 3% on Friday after the company revealed a delay in the construction of its first factory, which was scheduled to open in Arizona next year, and warned that its 2023 revenues would decline by 10%.
The effects of the global economic downturn are hurting demand for semiconductors used in everything from automobiles to telephones, and on Thursday, TSMC (TSM) disclosed its first quarterly earnings that decreased year over year since 2019. Net profit for the business fell by 23% in the second quarter. Brady Wang, associate director at Counterpoint Research, stated that the company’s long-term growth prospects remained positive despite the company’s unexpectedly dropping revenue and earnings.
Despite facing financial difficulties, “TSMC’s long-term outlook remains robust, supported by megatrends like 5G and high-performance computing.” TSMC revealed construction at its first factory in Arizona will be delayed until 2025 owing to a shortage of skilled staff as it quickens its global development. The production schedule for the N4 process technology is anticipated to be delayed until 2025, according to TSMC chairman Mark Liu.
Liu furthered on Thursday, saying, “While we are working to improve the situation, including sending experienced technicians from Taiwan to temporarily train the local skilled workers.” TSMC invested a total of $40 billion on the US project. The company claimed that even though it was the biggest producer of AI chips and that there was a growing market for AI, these advantages couldn’t offset more general end-market difficulties because the global economy recovered more slowly than anticipated.
The hype around the desire for AI in the short term cannot in any way be extrapolated to the long term. The strong demand cannot be anticipated to continue or level off in the near future, which is next year, Liu added. The corporation did, however, surpass expectations with earnings of 181.8 billion Taiwan dollars ($5.85 billion) for the quarter ended in June. TSMC, according to Goldman Sachs, is “well-positioned for a strong growth outlook in 2024.”
“We think investors are prepared for the delay in US expansion as well.” Other experts had positive things to say about TSMC because of the high demand for AI, which now makes up around 6% of the company’s sales. A good outlook was predicted by Citi Research analysts for the company through 2024 as a result of its dominance in the production of AI chips.