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TSMC cuts its 2023 capital expenditure due to poor demand after recording a strong Q4 2022

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Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chipmaker, is a rare bright spot in a global tech industry grappling with worsening consumer demand caused by decades of high inflation, rising interest rates, and an economic downturn.

On Thursday, TSMC reported a 78% increase in quarterly profit, exceeding expectations, as strong sales of advanced chips helped it overcome a broader industry downturn that battered cheaper commodity chips.

Samsung Electronics Co Ltd’s quarterly profit fell two-thirds to an eight-year low, blaming a weakening global economy for lowering memory chip prices and reducing demand for electronic devices.

TSMC
credit: reuters
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TSMC’s dominance in producing some of the most advanced chips for high-end customers like Apple Inc. has protected it from a downturn. Nonetheless, it reduced its capital expenditure plan for 2023 on Thursday, highlighting the worsening demand outlook.

The chipmaker now expects to spend $32 billion to $36 billion, up from $36.3 billion in 2022, and revenue in the first quarter of $16.7 billion to $17.5 billion, up from $17.57 billion a year ago.

TSMC, Asia’s most valuable listed company and backed by billionaire Warren Buffett’s investment conglomerate Berkshire Hathaway Inc, has repeatedly stated that it will benefit from a “mega-trend” of demand for high-performance computing chips for 5G networks and data centres, as well as increased use of chips in gadgets and vehicles.

It reiterated on Thursday that slower demand was a cyclical issue and that 2023 would be a year of slight growth for the company. Late last year, TSMC began construction on a second chip factory in Arizona, which will begin production in 2026 using advanced 3 nm technology. Its total investment in the project in the United States is $40 billion.

TSMC
credit: reuters
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CEO Wei stated that TSMC was considering building a second fab in Japan, and that it was also considering building a speciality fab focused on the auto industry in Europe, without providing further details.

TSMC reported a record net profit of T$295.9 billion ($9.72 billion) from October to December, up from T$166.2 billion the previous year.

In comparison, the average of 21 analyst estimates compiled by Refinitiv was T$289.44 billion. Revenue increased 26.7% to $19.93 billion, exceeding TSMC’s previous forecast range of $19.9 billion to $20.7 billion. The share price of TSMC fell 27.1% in 2022, but is up 8.5% this year, giving the company a market value of $412.78 billion. The stock gained 0.4% on Thursday, while the benchmark index fell 0.1%.

TSMC reported a record net profit of T$295.9 billion ($9.72 billion) from October to December, up from T$166.2 billion the previous year. In comparison, the average of 21 analyst estimates compiled by Refinitiv was T$289.44 billion.

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Nivedita Bangari
Nivedita Bangari
I am a software engineer by profession and technology is my love, learning and playing with new technologies is my passion.

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