The world’s largest contract chipmaker, TSMC, warned of a 10% decline in 2023 sales and delayed the start of production at its first plant in Arizona, sending its stock down more than 3% on Friday.

Taiwan Semiconductor Manufacturing Co. Ltd.’s shares outperformed a 1.65% decline in the larger index in early trade.

As the effects of the global economic downturn weigh on demand for chips used in everything from cars to telephones, TSMC reported a 23.3% decline in second-quarter net profit on Thursday. This is the company’s first quarterly profit decline year over year since the second quarter of 2019.

“TSMC’s Q2 2023 earnings sent mixed signals. While the company’s declining revenue and profit were disappointing, its long-term growth prospects remain encouraging,” Brady Wang, associate director at Counterpoint Research, said.

“Despite facing macroeconomic headwinds, TSMC’s long-term outlook remains robust, supported by megatrends like 5G and high-performance computing (HPC).”

TSMC said production at its first factory in Arizona will be delayed until 2025 owing to a shortage of specialised staff as it ramps up its global development.

Analysts noted that the company’s T$181.8 billion ($5.85 billion) in profitability for the quarter ended in June still exceeded expectations. They also noted that the revision to full-year revenues was expected.

“The revenue guidance downward revision could be the last cut for TSMC as the inventory correction cycle is likely coming to an end in 4Q23, in our view, and we see TSMC well positioned for a strong growth outlook in 2024,” Goldman Sachs said in a research note.

“We believe the U.S. expansion delay is also well expected by investors.”

Due in part to the robust demand for artificial intelligence (AI), which now accounts for 6% of revenue, other experts were also optimistic about TSMC.

“We expect a solid 2024 onward outlook on the back of its leading position in AI chip manufacturing,” Citi Research analysts said in a note.

(Adapted from ChannelNewsAsia.com)