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TSMC cuts 2023 capex after record Q4 as chip demand weakens

  • Q4 earnings T$295.9 billion vs T$289.44 billion analyst view
  • Q4 revenue up 26.7% year-over-year to $19.93 billion
  • Sees 2023 capex of $32-36 billion vs $36.3 billion last year
  • 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 that it would reduce annual investment as major Apple Inc ( AAPL. The O) supplier expects weaker investment demand due to a slowing global economy.

The bearish outlook follows a 78% jump in fourth-quarter profits and underscores the depth of a sharp downturn in a global technology sector struggling with worsening consumer demand caused by decades-high inflation rates, rising interest rates and an economic slowdown.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s most valuable chip maker, nevertheless estimates that growth will return in the second half of this year.

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

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

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

The income in the first half of the year shows a medium to high single-digit percentage decrease. First-quarter revenue is expected in a 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 shielded it from downturns. But the company is likely to fall victim to the deepening downturn, with the current quarter likely to mark its first sales decline in four years.

The fourth quarter “was dampened by soft end-market demand and customer inventory adjustment,” Chief Financial Officer Wendell Huang told a briefing, adding that such conditions will carry into the first quarter.

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

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 a “mega-trend” of demand for high-performance data chips for 5G networks and data centres, as well as increased use of chips in gadgets and vehicles.

It reiterated on Thursday that lower demand was a cyclical problem and that 2023 would be a weak growth year overall for the company.

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

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

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

CEO Wei said TSMC was considering building a new factory in Japan, and in Europe it was also considering the possibility of building a special factory focused on the automotive industry, without providing further details.

He added that the company expected the chip shortage to be “relaxed quickly”.

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 compared with the T$289.44 billion average of 21 analyst estimates compiled by Refinitiv.

Revenue rose 26.7% to $19.93 billion, versus TSMC’s previously estimated range of $19.9 billion to $20.7 billion.

TSMC’s stock price fell 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 rose 0.4% on Thursday against a 0.1% drop for the benchmark index (.TWII).

($1 = 30.4420 Taiwan dollars)

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

Our standards: Thomson Reuters Trust Principles.

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