TSMC cuts 2023 capex after record Q4 as chip demand weakens

  • Q4 profit at T$295.9 billion vs T$289.44 billion analyst view
  • Fourth-quarter revenue rose 26.7% year over year to $19.93 billion
  • Forecasts 2023 capital spending at $32-36 billion, up from $36.3 billion a year earlier
  • 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 major Apple Inc. (AAPL.O) the supplier expects softer demand due to a slowdown in the global economy.

The bearish outlook follows a better-than-expected 78% surge in fourth-quarter profit, underscoring the depth of a sharp slowdown in the global technology sector, which is grappling with deteriorating consumer demand fueled by decades-high inflation, rising interest rates and an economic downturn.

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

“We forecast that the semiconductor cycle will bottom out sometime in the first half and we will see a recovery in the second half of 2023,” said CEO CC Wei, adding that the recovery will be boosted by new product launches such as goods with activated artificial intelligence.

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

Hopes of a recovery in the second half of the year and a reduction in capital spending to manage supply led to a 7.5% rise in US-listed TSMC shares.

First-half revenue is seen to see a mid- to high-single-digit percentage decline. First-quarter revenue is expected to be in the range of $16.7 billion to $17.5 billion, compared with $17.57 billion a year earlier.


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

The fourth quarter “was tempered by softness in end-market demand and a correction in customer inventory,” Chief Financial Officer Wendell Huang said in a briefing, adding that similar conditions would continue in the first quarter.

“Given the near-term uncertainty, we continue to manage our business prudently and tighten our capex when appropriate,” Huang said. “Our disciplined capital expenditure and capacity planning remains based on the long-term profile of market demand.”

TSMC, Asia’s most valuable listed firm, 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.

On Thursday, she reiterated that slower demand is a cyclical issue and overall 2023 will be a year of mild growth for the company.

TSMC said it plans to increase production outside Taiwan as global attention focuses on its investment plan and various governments rely on incentives to boost chip production in their countries.

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

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

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

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

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

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

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

($1 = NT$30.4420)

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

Our standards: Thomson Reuters Trust Principles.

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