TSMC cuts 2023 capital after record Q4 as chip demand weakens

  • The profit of the 4th quarter was 289.44 billion T$ against 295.9 billion T$.
  • The income of the 4th quarter increased by 26.7% year-on-year to 19.93 billion
  • Sees capital at $36.3 billion in 2023 vs. $32-36 billion
  • The company plans to increase production abroad

TAIPEI, Jan 12 (Reuters) – Taiwanese chipmaker TSMC ( 2330.TW ) warned on Thursday that first-quarter revenue would fall as much as 5% and cut annual investment as it expects a softer supplier to key Apple Inc ( AAPL.O ). demand due to the slowdown in the global economy.

After a projected 78% jump in fourth-quarter profits, the bearish outlook underscores the depth of the sharp slowdown in the global technology sector, which has struggled for decades with high inflation, rising interest rates and rising consumer demand. economic recession.

Still, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s most valuable chipmaker, predicts a return to growth in the second half of this year.

“We expect the semiconductor period to dip sometime in the first half and recover in the second half of 2023,” CEO CC Wei said, adding that growth will be boosted by the launch of new products such as AI-enabled goods.

The world’s largest contract chipmaker said capital spending in 2023 will fall to $32-36 billion from $36.3 billion in 2022.

Hopes of a recovery in the second half of the year and capital cuts to manage supply sent TSMC’s US-listed shares up 7.5%.

A mid- to high-single-digit percentage decline in first-half revenue is observed. First-quarter revenue is expected to be in the $16.7-$17.5 billion range, compared with $17.57 billion a year ago.


TSMC’s dominance in making cutting-edge chips for high-end customers like Apple has protected it from decline. But the company is likely to fall prey to a deepening slowdown, with the current quarter posting its first sales decline in four years.

The fourth quarter was “weakened by softness in end-market demand and customer inventory adjustments,” Chief Financial Officer Wendell Huang said, adding that such conditions would continue into the first quarter.

“Given the near-term uncertainties, we continue to manage our business prudently and increase our capital spending as necessary,” Huang said. “Our disciplined capital and capacity planning remains based on the long-term market demand profile.”

TSMC, Asia’s most valuable listed company backed by billionaire Warren Buffett’s investment conglomerate Berkshire Hathaway Inc ( BRKa.N ), has repeatedly said the business will continue to benefit from the “mega-trend” of demand for high-performance computing chips for 5G. networks and data centers, as well as the increased use of chips in gadgets and vehicles.

It reiterated on Thursday that slower demand is a cyclical problem and that overall 2023 will be a modest growth year for the company.

TSMC said it plans to ramp up production outside Taiwan as global attention turns to its investment plan and various governments end incentives to boost chip production in their home countries.

He said at least a fifth of the company’s 28-nanometer (nm) and more advanced node capacity, which accounts for most of its revenue in 2022, could be overseas “within five years or so.”

TSMC late last year began construction of a second chip factory in Arizona, using advanced 3nm, which will begin production in 2026. Its total investment in the US project is 40 billion dollars.

CEO Wei said TSMC is considering building a second factory in Japan and is evaluating the possibility of building a specialty factory focused on the automotive industry in Europe as well, without providing further details.

He added that the company expected the auto chip shortage to “relieve quickly.”

For the October-December period, TSMC posted a record net profit of T$295.9 billion ($9.72 billion), up from T$166.2 billion a year earlier. That compared with the T$289.44 billion average of 21 analyst estimates compiled by Refinitiv.

Revenue rose 26.7% to $19.93 billion, from TSMC’s previous estimate of $19.9 billion to $20.7 billion.

TSMC’s stock price is down 27.1% in 2022, but is up 8.5% so far this year, giving the firm a market value of $412.78 billion. It rose 0.4%, compared with a 0.1% drop for the stock index (.TWII) on Thursday.

($1 = 30.4420 Taiwan dollars)

Reporting by Yimou Lee and Sarah Wu; Written by Ben Blanchard; Edited by Christopher Cushing and Conor Humphries

Our standards: Thomson Reuters Trust Principles.

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