The Taiwan Semiconductor Manufacturing Company (TSMC) is slated to benefit from strong orders from Apple and NVIDIA to help its fourth quarter results, according to analysts. However, a broader slowdown in the consumer electronics market coupled with low demand for chip fabrication might not prove to be so kind to the firm next year, creating worries about TSMC's ability to sustain the meteoric rise in sales that the firm has experienced since the uptick in electronics demand in the aftermath of the coronavirus pandemic.
TSMC's Fourth Quarter Revenue Can Grow Between 7% and 9% Based On Strong Demand From Apple & NVIDIA Believes Analyst
TSMC has been the subject of much speculation in the Taiwanese press lately after the firm faced some troubles building its latest chip manufacturing factories and downgrading its annual revenue guidance multiple times. TSMC's latest earnings call for its second quarter saw the firm reduce the full-year guidance. Currently, the firm is sticking with the guidance even though news reports claim that another downgrade might also be in the works.
Today, a fresh analyst report claims that TSMC will meet its revenue guidance for the current quarter. Due to strong orders from Apple and NVIDIA, the company can also post between 7% to 9% in revenue growth for the fourth quarter. Apple is expected to stock close to 86 million iPhone units after it upgrades the smartphone next month. NVIDIA will help TSMC meet capacity utilization for its latest semiconductor technology since they do not require certain packaging technologies.
Overall, strength in the broader demand for artificial intelligence products is expected to drive TSMC's Q3 2023 revenue to range between $16.5 billion and $17.5 billion. Additionally, for the fourth quarter, the revenue is estimated to sit at $18.6 billion and mark an 8% sequential, or quarter over quarter, growth.
However, while the outlook for the fourth quarter might be rosy, 2024 can shape up to be different. Consumers and businesses in the U.S. are currently coming off from facing record high inflation and the Chinese economic growth engine is sputtering. All these account for a large portion of TSMC's revenue, and the outlook in America, in particular, is stuck between worrying about more interest rate hikes or a potential recession.
Naturally, this creates an uncertain business outlook which can affect TSMC's orders as well. Forecasts from the semiconductor supply chain suggest that mid tier and non automotive chip demand can continue to be weaker next year. In economic terms, the recovery is expected to be 'L-shaped', where a steep decline in output is followed by a slow recovery.
This dour outlook is influenced by cautious expectations about 2024, which will be the second year to mark a recovery from the inflationary shock of the Russian invasion of Ukraine in 2022 and generous stimulus spending during the coronavirus pandemic to stimulate economic growth.
At the same time, orders for wafers are slowing down, and industry sources expect that TSMC will offer discounts of as much as 5% to customers based on their procurement profiles. Cumulatively, this injects uncertainty into the firm's revenue growth for 2024, and it also matches the sentiment shared by TSMC executives during the firm's latest earnings call, where they were forthcoming to share that a recovery in the chip sector is taking longer than initially believed.
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