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TSMC leaves 2023 capex plan unchanged, but expects sales to fall
 

04/20/2023 09:01 PM

Taipei, April 20 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, said on Thursday it has left its capital expenditure budget for 2023 unchanged, but expects revenue to fall from a year earlier this year in the wake of weakening demand from end-users.

At an investor conference, TSMC's Chief Financial Officer Wendell Huang (黃仁昭) said the chipmaker has maintained its 2023 capex budget at US$32 billion to US$36 billion, unchanged from the plan the company disclosed at its last investor conference held in mid-January.

TSMC's capex plan was devised after the company took into account it's growth and the needs from clients over the next few years, while the company will also adjust spending in the wake of short-term uncertainty, Huang said.

In the first quarter, TSMC spent US$9.94 billion in capex, down 8.1 percent from the previous quarter but up 6 percent from a year earlier, Huang said.

While leaving the capex plan unchanged, TSMC's CEO C.C. Wei (魏哲家) said the company has become more cautious about the market outlook for 2023 due to weaker-than-expected market demand, forecasting that revenue will fall 1 percent-6 percent from a year earlier in U.S. dollar terms, a downgrade from an earlier estimate of "a slight increase" made in January.

Wei said it is possible the global semiconductor industry, excluding memory chip suppliers, could suffer a 4 percent-6 percent year-on-year decline in sales, steeper than its earlier forecast of an about 4 percent fall, with sales posted by the pure play wafer foundry segment as a whole expected to decline by 7 percent-9 percent, compared with an earlier forecast of a 3 percent fall.

As for the second quarter, Huang said TSMC will continue to feel the pinch from inventory adjustments by its clients and expects to generate US$15.2 billion to US$16.0 billion in sales with a median figure of US$15.8 billion, which will be about 6.7 percent lower than a quarter earlier.

Before the investor conference, TSMC released a statement, saying the company raked in NT$206.99 billion (US$6.76 billion) in net profit, down 30.0 percent from a quarter earlier but up 2.1 percent from a year earlier, with earnings per share at NT$7.98, compared with NT$11.41 in the previous quarter and NT$7.82 a year earlier.

During the January-March period, TSMC's gross margin -- the difference between revenue and the cost of goods sold -- hit 56.3 percent, beating the forecast of 53.3 percent-55.5 percent the company gave in mid-January, but the first quarter figure fell 5.9 percentage points from a quarter earlier due to weakening demand and a stronger Taiwan dollar against the U.S. dollar.

Huang said TSMC's gross margin will fall to 52 percent-54 percent in the second quarter, while its operating margin -- the difference between sales, the cost of goods sold and operating expenses -- will fall to 39.5 percent-41.5 percent from 45.5 percent in the first quarter.

Huang said the expected lower gross margin is due to a fall in capacity utilization as well as an increase in electricity rates.

He said as a big power consumer, which uses high and ultra-high voltage, TSMC has seen a 17 percent hike in electricity rates from April 1, and is expected to have its gross margin wiped out by about 0.6 percentage points in the second quarter and 0.5 percentage points for all 2023.

However, Huang said over the longer term, TSMC's goal of a gross margin in excess of 53 percent remains achievable.

Amid market speculation that TSMC has adjusted its production technologies at a planned wafer plant in Kaohsiung, Wei confirmed the chipmaker will change the previously planned mature 28 nanometer process into an advanced process in an effort to meet market demand.

Wei did not give a timeframe for the Kaohsiung plant to start mass production to allow flexibility in the evolution of the plan TSMC announced in 2021. The previous Kaohsiung investment plan indicated TSMC would use sophisticated 7nm and mature 28nm processes.

As for its investments in the U.S. and Japan, mass production of chips made using the 4nm process in the U.S. state of Arizona and commercial production of chips made on its 12nm, 16nm and 22nm processes as well as 28nm specialty technology in Japan's Kumamoto will begin in 2024 as scheduled, Huang said.

In Arizona, TSMC is building another wafer plant using the more sophisticated 3nm process, and spending about US$40 billion on the two plants in the U.S. state.

On international media reports that TSMC is seeking up to US$15 billion in subsidies from the U.S. government under the CHIPS and Science Act, Huang said the company continues talks with U.S. authorities on the matter and nothing has been finalized.

On March 30, TSMC Chairman Mark Liu (劉德音) said certain supplementary restrictions in the CHIPS and Science Act are "unacceptable" and could dissuade potential partners from applying for the grant, but he did not specify which restrictions concerned the company.

According to news reports, TSMC is concerned about rules that could require the chipmaker to share profits from the factories and provide detailed information about operations to the U.S. government.

(By Chang Chien-chung, Chung Jung-feng and Frances Huang)

 

Source, https://focustaiwan.tw/business/202212270019

 

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