The stock of Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip manufacturer, declined by more than 3% on Friday after the company disclosed 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 crisis are reducing demand for semiconductors used in everything from automobiles to mobile phones. On Thursday, TSMC (TSM) reported its first quarterly earnings decline year-over-year since the beginning of 2019. The company’s net income decreased by 23% in the second quarter. Brady Wang, associate director at Counterpoint Research, stated that the company’s long-term development prospects remained optimistic despite the unexpected decline in revenue and earnings.
Despite financial difficulties, “TSMC’s long-term outlook remains robust, supported by megatrends like 5G and high-performance computing.” As TSMC accelerates its global expansion, the construction of its first factory in Arizona will be delayed until 2025 due to a skilled labor shortage. According to TSMC chairman Mark Liu, the production schedule for the N4 process technology is expected to be delayed until 2025.
Liu added on Thursday, “While we are working to improve the situation, including sending experienced technicians from Taiwan to temporarily train the local skilled workers.” TSMC invested $40 billion on the United States initiative. The company claimed that despite being the largest producer of AI chips and a growing market for AI, these advantages were unable to counterbalance more general end-market difficulties due to the slower-than-anticipated recovery of the global economy.
The short-term hoopla surrounding the desire for AI cannot be extrapolated to the long-term. Liu added that it is unlikely that the strong demand will persist or level off in the near future, which is next year. For the quarter ending in June, however, the company’s earnings of 181.8 billion Taiwan dollars ($5.85 billion) exceeded expectations. Goldman Sachs states that TSMC is “well-positioned for a strong growth outlook in 2024.”
We believe that investors are also prepared for the delay in US expansion. Other experts had positive things to say about TSMC due to the high demand for artificial intelligence, which now accounts for approximately 6% of the company’s revenue. Citi Research analysts predicted a positive prognosis for the company through 2024 due to its dominance in the production of AI chips.