- Q4 profit of T$295.9 billion vs. T$289.44 billion analyst opinion
- Fourth-quarter revenue increased 26.7% year over year to $19.93 billion
- Capital expenditures for 2023 are $32-36 billion compared to $36.3 billion last year
- The company plans to ramp up production abroad
TAIPEI, Jan 12 (Portal) – Taiwanese chipmaker TSMC (2330.TW) warned on Thursday that first-quarter sales would fall by as much as 5% and cut annual investments as the major supplier to Apple Inc. ( AAPL.O) expects a drop in demand due to a weakening global economy.
The bearish outlook follows a projected 78% rise in fourth-quarter earnings and underscores the depth of a sharp slowdown in a global tech sector grappling with deteriorating consumer demand caused by decades of high inflation, rising interest rates, and the economic crisis .
Still, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s most valuable chipmaker, forecasts renewed growth in the second half of this year.
“We expect the semiconductor cycle to bottom out sometime in the first half and see a rebound in the second half of 2023,” CEO CC Wei said, adding that the rebound will be fueled by new product launches such as products with artificial intelligence would be reinforced.
The world’s largest contract chipmaker said its capital expenditures would fall to $32-$36 billion in 2023 from $36.3 billion in 2022.
Hopes for a recovery in the second half of the year and investment cuts to steer supply pushed US-listed shares of TSMC up 7.5%.
Revenue for the first half of the year is expected to decline in the mid- to high-single-digit percentage range. Revenue for the first quarter is expected to be in a range of $16.7 billion to $17.5 billion, compared to $17.57 billion a year ago.
INVESTMENT
TSMC’s dominance in making some of the most advanced chips for high-end customers like Apple has saved it from a downturn. But the company is likely to fall victim to the deepening slowdown, with the current quarter likely to post its first revenue decline in four years.
The fourth quarter “was dampened by weak end-market demand and customer inventory adjustments,” CFO Wendell Huang said at a briefing, adding that such conditions will continue in the first quarter.
“Given the near-term uncertainties, we continue to manage our business prudently and are streamlining our capital expenditures where appropriate,” said Huang. “Our disciplined investment and capacity planning continues to be based on the long-term market demand profile.”
TSMC, Asia’s most valuable public company, which is backed by billionaire Warren Buffett’s investment conglomerate Berkshire Hathaway Inc (BRKa.N), has repeatedly said its business continues to be driven by a “megatrend” in demand for high-performance computing chips for 5G Networks and data centers would benefit, as would the increased use of chips in devices and vehicles.
It reiterated on Thursday that slower demand was a cyclical issue and 2023 would be an easy growth year for the company overall.
TSMC said it plans to ramp up production outside of Taiwan as global attention focuses on its investment plan and various governments float incentives to boost chip manufacturing in their countries.
At least a fifth of its 28 nanometer (nm) and more advanced node capacity, which accounted for most of the company’s sales in 2022, could be “within five years or more” abroad.
TSMC began building a second chip fab in Arizona late last year that will start production in 2026, using advanced 3nm chips. The total investment in the US project amounts to 40 billion US dollars.
CEO Wei said TSMC is considering building a second factory in Japan, and in Europe it is also exploring the possibility of building a specialty factory focused on the auto industry, without giving further details.
He added the company expects the autochip shortage to be “quickly eased”.
For October-December, TSMC posted a record net income of T$295.9 billion (US$9.72 billion) compared to T$166.2 billion a year earlier. This compares to the average of T$289.44 billion from 21 analyst estimates compiled by Refinitiv.
Revenue rose 26.7% to $19.93 billion from TSMC’s previously estimated range of $19.9 billion to $20.7 billion.
TSMC’s stock price fell 27.1% in 2022 but is up 8.5% so far this year, giving the company a market value of $412.78 billion. The stock rose 0.4% on Thursday versus a 0.1% decline in the benchmark index (.TWII).
($1 = 30.4420 Taiwan Dollars)
Reporting by Yimou Lee and Sarah Wu; writing by Ben Blanchard; Edited by Christopher Cushing and Conor Humphries
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