iPhone 15 fails to save TSMC from lowest profits in five years

Apple's iPhone processor manufacturer TSMC has posted its greatest drop in profits since 2019, despite the quarter ending with the release of the iPhone 15 range.

Ahead of its July 2023 earnings report, analysts had correctly predicted that TSMC's profits would be down, but presumed they would rebound for the September quarter because of demand for Apple's new iPhone 15 range. However, according to CNBC, while TSMC's latest figures are better than analysts expected, they still represent the firm's biggest decline since Q1 2019.

For Q3 2023, TSMC reports it earned a profit of $6.69 billion. It's a revenue drop of 10.83% year on year, while net income fell 24.87% over the same period. Apple is about 23% of TSMC's annual earnings, but it is more heavily loaded into an earlier quarter in the year, given manufacturing timetables.

"Our business was supported by the strong ramp of our industry-leading 3-nanometer technology and higher demand for 5-nanometer technologies," said TSMC in its earnings report, "partially offset by customers' ongoing inventory adjustment."

While TSMC is Apple's sole manufacturer of Apple Silicon processors, however, Apple represents about a fifth of the Taiwanese firm's overall revenue. In 2020, Apple reportedly bought out the whole of TSMC's 3-nanometer manufacturing capability for its Apple Silicon devices.

Without specifying Apple or any other specific influence, though, TSMC CEO CC Wei said that the company expects "our business in the fourth quarter to be supported by the continued strong ramp [up] of our 3-nanometer technology."

Wei also said that there is increased demand for processors because of AI, but that it is "not enough to offset" a weakening demand for consumer electronics.

"Due to the persistent weaker overall macroeconomic conditions and slow demand recovery in China," he continued, "customers remain cautious in their inventory control."

"That's why we expect the inventory digestion to continue in the fourth quarter," said Wei. "Having said that, we are observing some early signs of demand stabilization in the PC and smartphone market."

Separately, TSMC has announced previously that it will begin production of 2 nanometer processors by 2025.