Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, came under pressure yesterday amid speculation that its major clients have cut their orders.
The stock faced a sell-off on the Taiwan Stock Exchange (TWSE) after the Chinese-language Economic Daily News reported that four major TSMC clients — MediaTek Inc (聯發科), Advanced Micro Devices Inc, Qualcomm Inc and Nvidia Corp — have scaled back their orders, citing a JPMorgan Chase & Co report.
The order cut has led TSMC to shut down four extreme ultraviolet (EUV) lithography machines, which roll out high-end chips, the report said.
Photo: Cheng I-hwa, Bloomberg
According to the report, demand for consumer electronic products such as smartphones and emerging technologies including high-performance computing devices, is weakening as the global economy slows down, impacting TSMC\'s operations.
In addition, the US government has instructed Nvidia and AMD not to supply their high-end graphics processing units to China, a move which also hurt demand, the report said.
The report said the four major clients accounted for more than 30 percent of TSMC\'s total sales and the shutdown of the four EUV lithography machines is likely to cut the chipmaker\'s net profit by 8 percent next year, with sales growth expected to hit 5 percent in US dollar terms.
The report added that TSMC\'s capital expenditure is expected to fall to US$36 billion in 2023 from an expected US$40 billion for 2022.
TSMC said it would not comment on market rumors and reiterated that its production capacity remains fully utilized until the end of the year and its sales growth forecast for the year remains unchanged.
Although the global economy faces headwinds in the short term, the long-term demand in the semiconductor industry is expected to remain solid, TSMC said.
“It appeared that the report about TSMC’s clients cutting orders stunned the market, pushing down the stock sharply, and the broader market had no choice but to follow,” Cathay Futures Consultant Co (國泰證期顧問) analyst Tsai Ming-han (蔡明翰) said.
“But I still have faith in TSMC’s lead over its peers in high-end processes, and the impact on its share price from the speculation could be short-lived,” Tsai said.
TSMC, the most heavily weighted stock in the local market, shed 3.37 percent to close at NT$472.5, with 34.63 million shares changing hands, an increase from Tuesday’s 16.66 million shares, TWSE data showed.
TSMC’s retreat contributed about 135 points to the decline of the TAIEX, which closed 267.15 points, or 1.82 percent, lower at 14,410.05, exchange data showed.
Chip stocks are in focus in Asia trading after a senior executive at Samsung Electronics Co warned that the semiconductor industry could be in for a rocky close this year.
“The general perception earlier this year was that the second half of would be better than the first half, but from April to May, it changed drastically,” said Kyung Kye-hyun, head of Samsung’s Device Solutions Division, which oversees the company’s semiconductor operations. “The world is changing so quickly.”
Kyung said the outlook for the second half of the year is gloomy, and Samsung is not yet seeing momentum for a recovery next year.
Kyung made the comments during a rare briefing yesterday at the company’s new chip fab in Pyeongtaek, South Korea.
Samsung’s strategy is to respond faster to market changes, rather than stick to an investment plan prepared in advance, he said.
That said, the company will do its best to keep capital expenditures steady, he added.
Separately, Macronix International Co (旺宏), the world’s biggest supplier of NOR flash memory chips, yesterday said revenue plummeted 25.6 percent to NT$3.73 billion (US$120.6 million) last month, from NT$5.01 billion a year earlier.
Memory module supplier Adata Technology Co (威剛科技) also reported that revenue declined 6.6 percent annually to NT$3 billion last month from NT$3.22 billion.
Adata said consumer demand fell short of expectations during the peak season, but the company sees limited room for DRAM spot prices to dip further.
Additional reporting by Bloomberg and Lisa Wang
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