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TSMC profits fall but the iPhone 15 will help it rebound

TSMC profits are expected to decline year-over-year

Apple supplier TSMC is expected to report a drop in profits soon, but business will recover in the third quarter because the company is producing the iPhone 15.

On Thursday, Taiwan Semiconductor Manufacturing Company (TSMC), a chip manufacturer based in Taiwan, is projected to reveal a 27% decrease in net profit for the second quarter of 2023. The decline is due to global economic challenges, which have affected the demand for semiconductors.

Analysts are predicting that TSMC's net profit for the period spanning April to June will amount to $5.58 billion, a decrease compared to the $7.64 billion recorded in the year-ago quarter of 2022, according to Reuters. The decline is not necessarily poor performance — instead, it can be attributed to the surge in chip demand following the Covid-19 pandemic with the demand returning to pre-pandemic levels.

Analysts from Taiwan's Fubon Investment anticipate that the second quarter will mark the low point of the current downward trend. However, they also mentioned that although the situation is expected to improve in the third quarter, it will still be weaker than usual due to ongoing efforts to address accumulated inventory.

A senior Taiwan fund manager believes that profits in the third quarter will bounce back because of the rise in artificial intelligence projects and the iPhone 15 lineup that Apple will launch later in 2023.

"Taiwan has not really benefited from electric vehicles, since the market is in China and most EV suppliers are in China. But artificial intelligence (AI) is a different story," he said. "Taiwan will benefit most from AI because the entire AI supply chain can be found here."

Typically, the second quarter is a relatively sluggish period for sales in the technology industry, as demand tends to accelerate during the third quarter and towards the end of the year, coinciding with the holiday shopping season.

The positive prospects for AI applications have contributed to the significant rise in TSMC's stock listed on the Taipei exchange, experiencing an increase of nearly 30% since the beginning of 2023. This performance has outpaced the overall market, which has grown approximately 22%.

TSMC is scheduled to disclose guidance for the third quarter and revise its previous earnings forecasts during the earnings call, which will take place at 0600 GMT on Thursday.