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TSMC Had a Great Q1, But Chip Recovery Looks Sluggish

Multiple chipmakers have suffered slowdowns across smartphones, personal computers, motor vehicles, and other consumer goods.

Photo of TSMC logo on a building
Photo by Briáxis F. Mendes via CC BY-SA 4.0

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Taiwanese Semiconductor Manufacturing Co. posted yet another solid first-quarter earnings report, handily beating analyst expectations, and the chip powerhouse expects solid second-quarter revenue growth. 

So why did the stock tank 5% on Thursday? 

All Good Things Should Fall Apart

Artificial intelligence is the biggest thing in tech, with everyone trying to determine how the fast-moving technology will impact the labor market, healthcare, modern warfare — even how Hollywood makes movies. And perhaps the biggest beneficiary of AI enthusiasm is TSMC — maker of some of the most advanced chips and the go-to supplier for Apple and Nvidia. 

Thanks to what CEO CC Wei called “insatiable AI-related demand for energy-efficient computing power,” TSMC saw revenue jump 13% in the first quarter and projected a Q2 revenue range above analysts’ expectations. 


Turns out the market can be quite satiated after all, at least for now: 

  • Multiple chipmakers have suffered slowdowns across smartphones, personal computers, motor vehicles, and other consumer goods. TSMC lowered its 2024 growth outlook for the overall semiconductor market — excluding memory chips — to 10%, down from “more than 10%” previously. The update drove down TSMC shares, while the PHLX Semiconductor Index fell about 1.5% on Thursday. The broader index is down nearly 14% in the past five weeks.
  • That slowing demand has spread to related sectors. ASML — the Dutch company that makes the machines that make chips — reported that Q1 sales fell 22%. 

Foreign Exchange: TSMC and other chipmakers are expanding their footprints, especially in the US, where billions in government subsidies offer the warmest of welcomes. Still, expanding beyond Taiwan, where 90% of the world’s chips are made, is not without cost, which TSMC plans to pass on to the customer. “If a customer requests to be in a certain geographical area, the customer needs to share the incremental cost,” Wei said on the earnings call. “In today’s fragmented globalization environment, cost will be higher for everyone, including TSMC, our customers, and our competitors.” In other words, “Got any more subsidies?”