If recent Taiwan press sources are correct, Taiwan Semiconductor Manufacturing Company (TSMC) will have a difficult couple of quarters. TSMC will hold a rare event in Taiwan to commemorate the opening of its new facility in Nan-ke, Taiwan. The business seldom hosts such events, but industry sources believe that this time the gathering is in response to criticism in Taiwan concerning a new plant that TSMC has opened in the United States.
Furthermore, TSMC’s main competitor in contract semiconductor manufacturing, Samsung Foundry, jumped the gun earlier this year when it announced 3-nanometer production in Korea after experiencing quality issues with its previous manufacturing technology.
The semiconductor sector had a difficult year in 2022, as global macroeconomic uncertainty and rising prices disrupted consumer spending power just as world economies were recovering from a two-year coronavirus epidemic. While the epidemic boosted demand for electronics owing to lockdowns, 2022 came as a surprise because companies like AMD, Intel, and NVIDIA were unable to predict the number of their order declines this year.
According to the Taiwanese tabloid DigiTimes, TSMC’s sales could decline by a painful 15% sequentially in the first quarter of next year.
A downturn in the first quarter of 2023 is not unexpected, as TSMC CEO Dr. C.C. Wei stated during the company’s third-quarter earnings conference. During the occasion, he stated that an order slowdown will occur in Q1, and that his company had decreased capital spending in response.
And for the inventory correction in 2023, all we want to say is like that. We expect probably 2023, the semiconductor industry will likely to decline. But TSMC also is not immune, but we believe our technology position, strong portfolio in HPC and longer-term strategic relationship with customer will enable our business to be more resilient than the overall semiconductor industry. And that’s why we say in 2023, still a growth year for TSMC and the overall industry probably will decline.
DigiTimes also provides information on TSMC’s usage rate, and the results aren’t promising. In the chip industry, utilisation refers to the percentage of machines that are operational and producing chips. According to the newspaper, the 7-nanometer and 6-nanometer manufacturing technologies would suffer a 50% decline in use next year. These are established methods used by companies such as AMD for their goods.
Furthermore, while TSMC’s 5-nanometer process has escaped largely undamaged, it will be affected next year. DigiTimes reports that TSMC is working with its customers to allow long-term commitments and contract renewals in order to manage order drops. Right now, semiconductor companies have a lot of inventory because they built it up in response to shortages during the pandemic.
However, due to inflation, the orders that were used to construct these inventory stockpiles did not materialise, and as a result, it will be some time before the situation stabilises and enterprises begin increasing their stocks again. Estimates from the industry imply that rebuilding could begin in the second part of next year, although this will be dependent on the overall macroeconomic outlook.
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