Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it would scale down capital spending by as much as 10 percent this year, as inventory corrections are expected to extend into the first half of this year amid sagging chip demand for data centers, PCs and smartphones.
The Hsinchu-based chipmaker said it is planning to spend US$32 billion to US$36 billion on manufacturing equipment this year, after spending US$36.3 billion last year, with most of this year’s spending budget allocated for advanced technologies.
“Entering 2023, we continue to observe softness in the consumer electronics end-market segment, while other segments like data center-related [devices] softened as well,” TSMC chief executive officer C.C. Wei (魏哲家) told an online inventors’ conference. “As customers and supply chains continue to take actions, we forecast semiconductor inventory will reduce sharply through the first half of 2023.”
Photo: Lisa Wang, Taipei Times
TSMC, the world’s biggest contract chipmaker, said it saw aggravated weakness in demand for chips made with 7-nanometer technology, as PC and mobile phone companies posted the tech sector’s severest inventory corrections and delayed new product launches.
That would lead to a “milder pickup” in 7-nanometer capacity utilization in the second half of this year, the chipmaker said.
However, TSMC said it still expects this year to be “a slight growth year.”
That means TSMC would outperform its foundry peers and the semiconductor industry as a whole, which are to see annual declines in revenue of 3 percent and 4 percent respectively, it said.
In US dollar terms, the company’s revenue would drop by a mid-to-high single-digit percentage in the first half of this year, TSMC said.
However, revenue is expected to rebound in the second half, driven by robust demand for semiconductors made on 3-nanometer nodes, the most advanced technology that is commercially available, for smartphones and high-performance computing devices such as servers, TSMC said.
“Demand for 3-nanometer chips exceeds our ability to supply. We expect 3-nanometer capacity to be fully utilized in 2023,” Wei said.
TSMC expects 3-nanometer chips to make up a mid-single-digit percentage of the company’s total revenue this year.
Revenue this quarter is forecast to drop by between 16 percent and 12 percent to between US$16.7 billion and US$17.5 billion, compared with US$19.93 billion last quarter, TSMC said.
Gross margin is to dip to 53.5 to 55 percent from 62.2 percent in the previous quarter, it said.
As for its global expansion plans, TSMC said it is considering building a second fab in Japan, with volume production scheduled to start next year.
The chipmaker said it is also evaluating building a factory in Europe to make automotive chips.
TSMC last month said it would build two advanced fabs in the US, with investment totaling US$40 billion, to make 4-nanometer and 3-nanometer chips as early as next year.
While the initial cost of setting up overseas fabs is higher, due to construction costs that are four to five times higher than in Taiwan, the company would strive to lower operating costs of overseas factories, as it aims to maintain its long-term gross margin target of 53 percent, TSMC said.
With the chipmaker’s continued global expansion, overseas capacity of 28-nanometer and more advanced chips would make up about 20 percent of its total capacity over the next five years, TSMC said.
The company yesterday reported that net profit last year soared 70 percent year-on-year to NT$1.02 trillion (US$33.49 billion), up from NT$596.54 billion in 2021.
Earnings per share rose to NT$39.2 from NT$23.01 in 2021, it said.
Gross margin rose to 59.6 percent from 51.6 percent in 2021, while revenue surged 42.6 percent to NT$2.26 trillion from NT$1.587 trillion.
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