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TSMC cuts 2023 capex after record Q4 as chip demand weakens

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  • Fourth quarter profit T$295.9 billion against T$289.44 billion, analyst view
  • Fourth-quarter revenue increased 26.7% year-over-year to $19.93 billion
  • Sees 2023 capex at $32-36 billion versus $36.3 billion a year ago
  • Company plans to increase production abroad

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

The bearish outlook follows an above-forecast 78% jump in fourth-quarter earnings, underscoring the depth of a sharp slowdown in a global tech sector that is grappling with worsening consumer demand brought on by decades of high inflation rates. , rising interest rates and an economic slowdown.

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

“We anticipate that the semiconductor cycle will bottom out in the first half and we will see a recovery in the second half of 2023,” said CEO CC Wei, adding that the recovery would be driven by the launch of new products such as artificial intelligence-enabled products.

The world’s largest contract chip maker said its 2023 capital spending would decline to $32-36 billion from $36.3 billion in 2022.

Hopes of a recovery in the second half of the year and the capex cut to manage the offering sent US-listed TSMC shares up 7.5%.

First half revenue is seen posting a mid to high single digit percentage decline. First-quarter revenue is expected to be between $16.7 billion and $17.5 billion, up from $17.57 billion a year earlier.


TSMC’s dominance in making some of the most advanced chips for high-end customers like Apple has protected it from the recession. But the company will likely fall victim to the deepening slowdown, with the current quarter likely to mark its first drop in sales in four years.

The fourth quarter “was hampered by falling end-market demand and customers’ inventory adjustment,” Chief Financial Officer Wendell Huang said in a briefing, adding that those conditions will continue into the first quarter.

“Given the near-term uncertainties, we continue to manage our business prudently and restrict our capital spending where appropriate,” Huang said. “Our disciplined capex 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 would continue to benefit from a “megatrend” of demand for computing chips. of high performance for 5G networks and data centers, in addition to the increased use of chips in devices and vehicles.

He reiterated on Thursday that slower demand was a cyclical issue and that 2023 overall would be a year of light growth for the company.

TSMC said it plans to increase production outside of Taiwan as global attention focuses on its investment plan and several governments offer incentives to increase chip manufacturing in their countries.

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

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

CEO Wei said that TSMC was considering building a second factory in Japan, and in Europe it was also evaluating the possibility of building a specialized factory focused on the auto industry without providing further details.

He added that the company expects the shortage of automotive chips to be “quickly eased”.

From October to December, TSMC posted record net income of T$295.9 billion (US$9.72 billion), up from T$166.2 billion in the previous year. That compared with the T$289.44 billion average of 21 analyst estimates compiled by Refinitiv.

Revenue increased 26.7% to $19.93 billion versus 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 company a market cap of $412.78 billion. The stock was up 0.4% on Thursday, versus a 0.1% drop for the benchmark (.TWII) index.

(US$1 = 30.4420 Taiwan dollars)

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

Our Standards: Thomson Reuters Trust Principles.