TSMC Cuts Back On Investment Budget Despite Revenue Surge

Taiwanese chip making behemonth TSMC beat revenue guidance for calendar Q3, as expected, but has cut its investment budget by at least 10 percent in the face of the semiconductor market slowdown.

The world's largest semiconductor contract manufacturer said its revenue for the three months that closed at the end of September was up 47.9 percent year-on-year to NT$613.14 billion ($20.23 billion) due to overall chip demand, just as net income grew by nearly 80 percent to NT$280.87 billion ($8.79 billion).

"Our third quarter business was supported by strong demand for our industry-leading 5nm technologies," explained TSMC VP and chief financial officer Wendell Huang.

However, slowing demand over recent months is now starting to have an impact. TSMC's forecasts include revenue expectations for the fourth quarter to be somewhere between $19.9 billion and $20.7 billion.

"Moving into the fourth quarter 2022, we expect our business to be flattish as the end market demand weakens, and customers' ongoing inventory adjustment is balanced by continued ramp-up for our industry-leading 5nm technologies," Huang said.

TSMC is also cutting back on capital investment. It had intended to spend at least $40 billion this year, but this is understood to have reached only about $25 billion so far and is likely to max out at about $36 billion by the end of the year.

However, the good news for TSMC is that it appears to have been granted a one-year license that exempts it from the recently announced US restrictions regarding exports to China.

According to Nikkei Asia, CEO C.C. Wei confirmed that it will be allowed to continue buying US chipmaking equipment for its expansion in Nanjing, China, at least for the duration of the license.

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• EU semiconductor investment not nearly enough, warns chip boss

TSMC is understood to be one of several prominent chipmaking companies that have been granted such a license by US authorities, but others in the semiconductor industry are reportedly concerned about the impact restrictions will have on trade.

For instance, Applied Materials, a US supplier of equipment, services and software for semiconductor manufacturing, has warned that the ban may reduce its Q4 2022 net sales by approximately $400 million, plus or minus $150 million, and revised its outlook accordingly.

Applied Materials also said the new regulations will impact net sales in the first quarter of fiscal 2023 by a similar amount, and that it is "pursuing additional export licenses and authorizations where needed."

Netherlands-based ASML, one of the key suppliers of equipment for chip manufacturing, has also informed its US employees to stop shipping products or providing support to companies in China, according to reports. The move shows how the restrictions are likely to have a wider impact beyond China and US companies.

The new restrictions have also drawn criticism from China's chipmaking trade body, the China Semiconductor Industry Association (CSIA), which called the move "arbitrary" and "discriminating," according to the South China Morning Post.

The CSIA reportedly claimed the measures will further harm the global supply chain of the semiconductor industry, and urged the US government to change its actions and return to trade negotiations with China. ®