TSMC Cuts Capital Expenditures Amid Tooling Delays And Demand Issues; cautious in outlook

  • Q3 profit of T$280.9 billion vs. T$265.64 billion analyst opinion
  • Third-quarter revenue increased 36% year over year to $20.23 billion
  • Fourth-quarter revenue is up 29% to $19.9 billion to $20.7 billion

TAIPEI, Oct 13 (Reuters) – Taiwanese chipmaker TSMC (2330.TW) has slashed its 2022 annual investment budget by at least 10% and is more cautious than usual amid upcoming demand, citing challenges from rising inflation costs and a Chip predicts downturn next year.

Referring to the recent U.S. export controls aimed at slowing China’s progress in manufacturing advanced chips, TSMC CEO CC Wei said on Thursday that the company had received a one-year permit to reopen its factory in Nanjing, China , covers.

The new rules require companies looking to supply advanced equipment to Chinese chipmakers to obtain a license from the US Department of Commerce, although Washington is expected to spare some foreign companies operating in China.

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“Based on our initial insights and feedback from customers, the new regulations set the control 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 chip manufacturer, manufactures most of its chips in Taiwan.

After profit rose 80% in the third quarter, the strongest growth in two years, TSMC said it was more conservative in planning capital expenditures for 2023.

“We anticipate that the semiconductor industry is likely to decline in 2023, but TSMC is not immune either,” Wei said in a media briefing.

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 downturn driven by chipmakers like 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 of high inflation, rising interest rates and COVID-19 lockdowns in China, which have weighed on the consumer electronics market.

TOOL DELAYS

TSMC, Asia’s most valuable publicly traded company, has reduced its capital expenditure (capex) for 2022 to around US$36 billion. In July, the company said it was flying the low end of its previous $40 billion to $44 billion in investment guidance this year, with some spending being pushed back to next year due to a delay in the delivery of some chip-making equipment.

“About half of the change is due to capacity optimization based on the current medium-term outlook and the other half to ongoing tooling challenges,” CFO Wendell Huang said in a media briefing.

For the fourth quarter, TSMC forecast revenue would increase 29% 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 remained stable 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 entire industry is likely to decline,” Wei said.

As recently as July, TSMC said the current downturn in the industry was having little impact and that long-term demand for its chips was “solid” as companies seek high-performance computing chips used in 5G networks and data centers, as well increased use of chips in devices and vehicles.

Net income for the third quarter ended September increased to T$280.9 billion (US$8.81 billion), compared to the average of T$265.64 billion from 21 analyst estimates compiled by Refinitiv.

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

TSMC’s shares are down 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% drop in the benchmark index (.TWII).

($1 = 31.8870 Taiwan Dollars)

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

Our standards: The Thomson Reuters Trust Principles.

#TSMC #Cuts #Capital #Expenditures #Tooling #Delays #Demand #Issues #cautious #outlook

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