Apple supplier TSMC, the world’s biggest contract chip maker, to keep spending in check amid weak global semiconductor demand
Taiwan Semiconductor Manufacturing Co (TSMC), the world’s biggest contract chip maker, expects to cut spending this year, as it braces for continued weakness in global demand.
“In the first half of 2023, we expect our revenue to decline by mid-to-high single digits per cent in US dollar terms over the same period last year,” TSMC chief executive C C Wei said on Thursday in the company’s fourth-quarter earnings conference call with analysts.
TSMC, based in the city of Hsinchu in northwestern Taiwan, predicted global semiconductor revenue to decline by 4 per cent this year amid soft demand in the consumer electronics and server computer markets. The company has forecast its first-quarter revenue this year to be between US$16.7 billion and US$17.5 billion, down as much as 5 per cent from a year earlier.
That has prompted the company to lower its 2023 capital expenditure to between US$32 billion and US$36 billion, compared with the original plan of between US$40 billion and US$44 billion it set in 2022. The firm already cut its total capital spending by 10 per cent last year to US$36.3 billion.
02:42
Biden tours new Taiwanese chip-making plant in Arizona, fans US-China semiconductor rivalry
Biden tours new Taiwanese chip-making plant in Arizona, fans US-China semiconductor rivalry
TSMC is working hard to control the costs associated with building new chip fabrication plants in the United States and Japan, for which government support is crucial, according to company chairman Mark Liu in the same conference call on Thursday.
Liu indicated that building overseas fabs carries costs higher than developing such facilities in Taiwan, which remain the crown jewels of TSMC’s foundry operations.
He said keeping TSMC’s gross margin above 53 per cent will be a major gauge to determine the pace of its global expansion, which currently includes a fab focused on mature chip technologies in Japan and two advanced fabs in the state of Arizona in the southwestern US. The company is still evaluating the development of a specialty fab for car chips in Europe.
Concentrating TSMC’s fabs in one place, like Taiwan, will not suffice to meet the needs of the company’s customers amid an “evolving political development”, Liu said, in an apparent reference to the trade war and tech rivalry between China and the US.
China’s move to counter chip controls falters as Washington tightens grip
China’s move to counter chip controls falters as Washington tightens grip
TSMC’s strategy for 2023 reflects a calculated move to ensure that the company would be more than capable to meet demand in the second half of the year, when it expects global semiconductor sales to rebound.
“We believe TSMC will have the pricing power to absorb the higher cost of overseas production and still maintain its long-term profitability target,” Sanford C Bernstein & Co analysts Mark Li and Edward Hou wrote in a report on Wednesday, after the Taiwanese chip maker reported its fourth-quarter financial results.
“We expect [TSMC’s] first-quarter revenue this year to suffer the second most severe sequential correction since 2010”, which the Bernstein report said would occur on the back of lower demand from Android smartphone and personal computer makers, compounded by further cuts from Apple’s iPhone production.
That correction is expected to be temporary, as TSMC sales are expected to start a recovery in the second quarter and accelerate in 2024, the report said.
Chip maker TSMC misses sales forecast as consumers buy fewer gadgets
Chip maker TSMC misses sales forecast as consumers buy fewer gadgets
Company chief executive Wei expected customer demand to grow for its most advanced 3-nanometre chips, which entered production in the fourth quarter.
TSMC, which is the exclusive supplier of advanced chips used on Apple’s iPhones and Macs, on Wednesday reported its first quarterly revenue miss in two years in the three months ended December 31.
Fourth-quarter revenue at TSMC rose 43 per cent to NT$625.5 billion (US$20.6 billion), which missed the NT$636 billion predicted by analysts on average.
Sales of smartphone and high-performance computing chips, such as those used for artificial intelligence, together made up 80 per cent of TSMC’s overall revenue of US$75.88 billion in 2022.
More than 70 per cent of TSMC’s capital spending this year will be allocated for advanced process technologies, about 20 per cent will be for specialty technologies, and 10 per cent on advanced packaging and mass production, according to company chief financial officer Wendell Huang.
He said TSMC’s research and development budget will rise by about 20 per cent year on year in 2023 to help maintain the firm’s tech leadership.
Capacity expansion at TSMC’s 28-nm fab in Nanjing, capital of eastern Jiangsu province, has been completed as planned, according to the company.
