TSMC Reduces CapEx for Tooling Delays and Demand Issues; cautious in perspective

  • Third quarter profit C$280.9 billion vs. C$265.64 billion according to analyst
  • Third-quarter revenue increased 36% year over year to $20.23 billion
  • Fourth quarter revenue jumps 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% by 2022 and struck a more cautious-than-usual note on upcoming demand, pointing to the challenges of rising cost inflation and predicting a chip recession next year.

Speaking in the last US set. export controls Aiming to slow China’s progress in making advanced chips, TSMC CEO CC Wei said Thursday that it had obtained a one-year license covering its factory in Nanjing, China.

The new rules require companies seeking to supply Chinese chipmakers with advanced equipment to obtain a license from the US Department of Commerce, although Washington is expected to do without some foreign companies operating in China.

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“Based on our initial reading and customer feedback, the new regulations set the control threshold at a very high-level specification, used primarily for artificial intelligence or supercomputing applications. Therefore, our initial assessment is that the impact to TSMC is limited and manageable,” Wei said. .

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

After posting an 80% jump in third-quarter profit, the strongest growth in two years, TSMC said it was being more conservative in planning investments for 2023.

“We expect that probably in 2023 the semiconductor industry will probably decline, but TSMC is also not immune,” Wei said in a media call.

TSMC’s dominance in manufacturing 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 recession signaled by chip manufacturers 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-high inflation, rising interest rates and China’s COVID-19 lockdowns that have squeezed the stock market. consumer electronics.

TOOL DELAYS

TSMC, Asia’s most valuable listed company, cut its capital expenditure (capex) for 2022 to around $36 billion. In July, the company said this year it would miss the low end of its previous capex forecast of $40 billion to $44 billion, with some spending pushed back to next year because of a delivery delay. some chip manufacturing 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 challenges in tooling delivery,” CFO Wendell Huang said in a statement. Press conference.

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

The company said its data center and auto businesses have been flat for now, and its business overall will be more resilient than others.

“We say that 2023 is still a growth year for TSMC, and the industry as a whole will likely decline,” Wei said.

Only in July, TSMC said had seen little impact from the current down cycle in the sector and long-term demand for its chips was “firmly established” thanks to companies buying high-performance computing chips used in 5G networks and data centers, as well as increased use. of chips in appliances and vehicles.

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

Revenue for the quarter increased 36% to $20.23 billion, compared to TSMC’s previous estimate range of $19.8 billion to $20.6 billion. China accounted for just 8% of revenue in the third quarter, down from 13% in the second.

TSMC shares 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 with a 2.1% drop for the benchmark. (.TWII).

($1 = NT$31.8870)

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

Our standards: The Thomson Reuters Trust Principles.

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