TSMC economizes on tool delays, begs for trouble; careful with prospects

Q3 earnings T$280.9 bln vs T$265.64 bln analyst view Q3 revenues up 36% year-on-year to $20.23 bln. See Q4 revenue rise 29% to $19.9-$20.7 billion

TAIPEI, Oct. 13 (Reuters) – Taiwanese chipmaker TSMC (2330.TW) cut its annual investment budget by at least 10% for 2022 and is more cautious than usual on upcoming demand, signaling challenges from rising inflation costs and forecasting a chip decline next year.

Speaking about the latest wave of US export controls aimed at slowing down China’s progress in advanced chip manufacturing, TSMC CEO CC Wei said on Thursday it had obtained a one-year authorization for its plant in Nanjing, China.

The new rules require companies looking to provide Chinese chipmakers with advanced equipment to obtain a license from the US Department of Commerce, although Washington is expected to spare some foreign companies operating in China.

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“Based on our first reading and customer feedback, the new regulation sets the control threshold to a very high specification, mainly used for AI or supercomputing applications. Therefore, our initial assessment is that the impact on TSMC is limited and manageable,” Wei said. . .

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chip maker, makes most of its chips in Taiwan.

After an 80% increase in profits in the third quarter, the strongest growth in two years, TSMC said it was more conservative in planning investments for 2023.

“We expect the semiconductor industry to probably decline in 2023, but TSMC is not immune either,” Wei told a media appeal.

TSMC’s dominance in making some of the world’s most advanced chips for high-end customers like Apple Inc (AAPL.O) and Qualcomm Inc (QCOM.O) had protected it from the downturn signaled by chipmakers including AMD ( AMD.O) and Micron Technology Inc (MU.O).

However, the Taiwanese company’s comment on Thursday was more in line with industry concerns about decades of high inflation, rising interest rates and COVID-19 lockdowns in China that have put pressure on the consumer electronics market.


TSMC, Asia’s most valuable publicly traded company, has reduced its capital expenditures (capex) to approximately $36 billion by 2022. In July, the company said it would hit the low end of its previous capex guideline of $40 billion to $44 billion this year, with some spending pushed back to next year due to a delay in delivery of some chip-making equipment. .

“About half of the change is due to capacity optimization based on the current medium-term outlook and the other half is due to ongoing tool delivery challenges,” Chief Financial Officer Wendell Huang said in a statement. media call.

For the fourth quarter, TSMC forecast revenue growth of 29% to between $19.9 billion and $20.7 billion, compared to $15.74 billion a year earlier.

The company said its data center and automotive business has remained stable for the time being, and that its business will generally be more resilient than others.

“We’re saying 2023 is still a growth year for TSMC and the overall industry is likely to decline,” Wei said.

As recently as July, TSMC said it had had little impact from the industry’s current down cycle and that long-term demand for its chips was “firm” thanks to companies seeking high-performance computer chips used in 5G networks. and data centers, as well as an increasing use of chips in gadgets and vehicles.

Net profit for the third quarter ended September increased to T$280.9 billion ($8.81 billion), compared to the average of T$265.64 billion from 21 analyst estimates compiled by Refinitiv.

Revenue for the quarter increased 36% to $20.23 billion, versus TSMC’s previously estimated bandwidth of $19.8 billion to $20.6 billion. China accounted for only 8% of sales in the third quarter, compared to 13% in the second.

Shares in TSMC have fallen nearly 36% so far this year, giving it a market value of $323.7 billion. The stock fell 0.6% on Thursday, compared to a 2.1% decline for the benchmark index (.TWII).

($1 = 31,8870 Taiwan dollars)

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Reporting by Ben Blanchard and Sarah Wu; Writing by Sayantani Ghosh; Editing by Christian Schmollinger, Edmund Klamann and Ana Nicolaci da Costa

Our Standards: The Thomson Reuters Trust Principles.

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