But TSMC, along with other chipmakers, is warning that weakened consumer demand and over-stockpiling by manufacturers and retailers may soon mark the end of record profits for the industry.

Chipmakers’ fortunes rose in the early days of the pandemic as fresh demand for electronics from stuck-at-home consumers and reduced supply due to manufacturing and logistics snags made the semiconductor one of the hottest products on planet Earth. Amid the supply crunch, business up and down the chip value chain raced to stockpile chips so they could better handle any further disruptions.

In its earnings call, TSMC warned that its customers might now draw on those chip reserves rather than place new orders. “Our expectation is for the excessive inventory in the semiconductor supply chain to take a few quarters to rebalance to a healthier level,” said TSMC CEO C.C. Wei.

TSMC also said it would trim its capital expenditure for 2022 to $40 billion, down from $44 billion, as it pushed the delivery of some chipmaking equipment to next year.

Bloomberg reported Friday that South Korean chipmaker SK Hynix is also considering reducing its 2023 capital expenses by 25%. The Korean chipmaker is concerned about softening demand for consumer electronics heading into next year, unidentified sources told Bloomberg. 

On July 7, Samsung reported a small quarter-on-quarter decrease in profit, which analysts say is an indication that consumer electronics demand is softening heading into the second half of the year. Samsung has 50 million unsold smartphones in its inventory, reports Korean outlet The Elec, or about 18% of the total units the company hopes to ship this year. A normal inventory level would be around 10%, The Elec notes.

It’s not just Asian chipmakers that are forecasting a softening in the market. On June 7, Intel CFO David Zinsner said that he expected the U.S. chipmaker’s second-quarter earnings to take a hit due to customers working through stockpiled inventory instead of placing new orders. (Intel will announce its second-quarter earnings on July 28). Micron Technologies also reduced its revenue guidance to $7.2 billion, below consensus estimates of $9 billion, due to weakening smartphone demand.

TSMC still expects 2022 to be a good year, projecting annual revenue of $19.8 billion to $20.6 billion that will surpass estimates of $18.5 billion. Wei said he expects demand for consumer electronics, like smartphones and computers, to fall amid a looming global economic slowdown but believes the chipmaker could pivot to still-strong sectors like data centers and cars.

Demand for electronics is softening faster than manufacturers expected, leading companies to clear out their stockpiles rather than order new chips or chip components. PC shipments in Q2 2022 fell by 12.6% year on year, according to consulting firm Gartner. Some computer manufacturers are even saying the chip shortage is over, with Acer CEO Jason Chen telling reporters on Wednesday that “the situation has changed,” and that chip suppliers are calling him directly to ask him “to buy more chips from them.”

The crypto crash could be another drag on the chip market, as crypto miners close up shop. Shipments of graphics cards—high-end processors that produce computer imagery and are used in crypto mining—fell 19% in the first quarter of 2022, notes consulting firm Jon Peddie Research.

Individual companies may still experience supply-chain disruptions. In April, Apple warned that supply problems may dent its June revenue by $8 billion. And other major consumer electronics manufacturers, like Sony and Nintendo, are reporting lower-than-expected production due to supply constraints.