TSMC cuts capex on tool delays, demand woes; cautious on outlook

  • Q3 profit of T$280.9 billion vs. T$265.64 billion, analysts say
  • Third-quarter revenue up 36% year-on-year to $20.23 billion
  • Fourth Quarter Revenue Increases 29% to $19.9 Billion to $20.7 Billion

TAIPEI, Oct 13 (Reuters) – Taiwanese chipmaker TSMC (2330.TW) cut its annual capital budget by at least 10% for 2022 and took a more cautious note than usual on future demand, signaling challenges from rising inflationary costs and forecasting a slowdown in chip l ‘next year.

Speaking on the latest round of US export controls aimed at slowing China’s progress in manufacturing advanced chips, TSMC CEO CC Wei said on Thursday that he had obtained clearance from a year covering its factory in Nanjing, China.

The new rules require companies seeking to supply Chinese chipmakers with cutting-edge equipment to obtain a license from the US Department of Commerce, although Washington would have to spare certain foreign companies operating in China.

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“Based on our initial reading and customer feedback, the new regulations set the screening threshold at a very high-end specification, primarily 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 chipmaker, manufactures most of its chips in Taiwan.

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

“We expect the semiconductor industry to probably decline in 2023, but TSMC isn’t immune either,” Wei said on a media call.

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 shielded it from the slowdown reported by chipmakers including AMD (AMD.O) and Micron Technology Inc. (MU.O).

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

TOOL DELAY

TSMC, Asia’s most valuable listed company, has cut its capital expenditure (capex) for 2022 to around $36 billion. In July, the company said it would scratch the bottom of its previous investment forecast of $40 billion to $44 billion this year, with some spending pushed back to next year due to a delay in the delivery of certain chip manufacturing equipment.

“About half of the change is due to optimizing capabilities based on the current mid-term outlook and the other half is due to persistent tool delivery challenges,” CFO Wendell Huang said during an interview. a call for the media.

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

The company said its data centers and automotive businesses remain stable for now, and its overall business will be more resilient than others.

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

It wasn’t until July that TSMC said it had seen little impact from the current bear cycle in the industry and that long-term demand for its chips was “firmly in place” thanks to companies buying chips. high-performance computer chips used in 5G networks and data centers. , as well as increased use of chips in gadgets and vehicles.

Net profit for the third quarter ended September reached $280.9 billion ($8.81 billion), versus an average of $265.64 billion from 21 analyst estimates compiled by Refinitiv.

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

Shares of 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. (.TWII).

($1 = 31.8870 Taiwan dollars)

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Reporting by Ben Blanchard and Sarah Wu; Written 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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