TSMC Faces Financial Struggles Amid Chip Sector Downturn

Taiwan Semiconductor Manufacturing Co. (TSMC) is facing financial difficulties as investor concerns grow about a prolonged downturn in the chip industry. This apprehension has resulted in a 10% decline in TSMC’s stock price since June, wiping out $72 billion from its market capitalization.

Previously, the company experienced a remarkable 60% increase in share value from October to June, driven by heightened global interest in artificial intelligence (AI). However, a recent decrease in orders for AI chips, rising bearish sentiment in contract trading, and weak demand in the global consumer electronics sector have raised doubts about TSMC’s future profitability.

Analysts from JPMorgan Chase & Co. predict a slow recovery for TSMC until 2024, citing lackluster demand in both AI and non-AI markets. The company’s capital expenditure projections, estimated between $32 and $36 billion, have sparked concerns about possible cutbacks. This situation unfolds as TSMC navigates the ongoing challenges in the chip sector.

In summary, TSMC’s situation is complex. While it has shown financial resilience, the current downturn in the chip industry and reduced AI chip orders present significant obstacles. Investors will be keenly observing how the company strategizes to address these challenges.