Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday projected a deeper revenue contraction of 10 percent for this year, saying strong artificial-intelligence (AI)-related chip demand would be insufficient to cushion soft market demand amid weaker-than-expected global economic growth and high inflationary pressure.
The world’s largest contract chipmaker in April estimated that revenue this year would drop by a low to mid-single-digit percentage from last year.
As consumers remain cautious about spending on non-essential items like smartphones or computers, TSMC said its customers have become more cautious about inventory management, even though inventories are expected to improve to healthier levels this quarter.
Photo: Sam Yeh / AFP
“We did see something different. The macro [economy] is weaker than what we thought. Three months ago, we were more optimistic. Now we are not. Also, for example, China’s economic recovery is actually weaker than we thought. End market demand actually did not grow as we expected,” TSMC chief executive officer C.C. Wei (魏哲家) told investors at the company’s quarterly earnings conference.
“Although we have very good AI processor demand, it is still not enough to offset that kind of macro impact,” Wei said, adding that AI applications would be the sole growth segment during the second half of this year.
The chipmaker said it would stick to its revenue target of an annual compound growth rate (CAGR) of between 15 percent and 20 percent in the next few years, despite this year’s setback. The chipmaker’s confidence is built on its belief that it would be one of the major beneficiaries from a semiconductor growth trend driven by 5G, high-performance computing and AI chips, which all require semiconductors made using advanced technologies.
TSMC, which makes AI graphics processing units for Nvidia Corp using 3-nanometer technology, said AI-related chips currently accounted for about 6 percent of the company’s revenue, including AI central processing units, AI accelerators and application-specific chips (ASICs) for AI applications, Wei said.
Revenue contribution from AI chips would rise to about 12 percent, or 13 percent of the chipmaker’s total revenue within the next five years, riding on rapid growth of AI chips at 50 percent of CAGR, Wei said.
Growth is to be fueled by the proliferation of AI from servers today to more edge and end devices, he said.
Commenting on overseas capacity deployment, TSMC said it would delay mass production at an advanced 12-inch fab in Arizona to 2025 from the end of next year.
TSMC plans to make 4-nanometer chips at the plant.
“We are encountering certain challenges, as there is an insufficient number of skilled workers with the specialized expertise required for equipment installation in large semiconductor facilities,” TSMC chairman Mark Liu (劉德音) said yesterday.
The chipmaker said it sent experienced technicians from Taiwan to train skilled workers in the US to overcome the difficulties.
In Japan, new fab construction is on track to start operations late next year, Liu said. In Europe, TSMC is evaluating building a factory to make chips used in cars along with partners and customers, he said.
TSMC said the initial costs of overseas fabs are higher than TSMC’s fabs in Taiwan due to a smaller fab scale, higher costs through the whole supply chain and insufficient semiconductor ecosystem in those overseas sites, as compared with a mature ecosystem at home.
Seeking to narrow the cost gap, TSMC recently met senior government officials from the US, Japan and EU, Liu said. The discussions went well, he added.
In the short term, TSMC expects a milder-than-usual seasonal pickup, with revenue expected to expand to between US$16.7 billion and US$17.5 billion in the current quarter. That would mean a sequential expansion of between 6.5 percent and 11.6 percent from US$15.68 billion last quarter.
Gross margin would drop to between 51.5 percent and 53.5 percent this quarter from 54.1 percent last quarter, diluted by the production of 3-nanometer chips.
The chipmaker yesterday reported net profit for last quarter sank 23.3 percent year-on-year, or down 12.2 percent quarter-on-quarter, to NT$181.79 billion (US$5.85 billion). Earnings per share dropped to NT$7.01 from NT$9.14 a year ago and NT$7.98 a quarter earlier.
Revenue contracted 10 percent annually, or down 5 percent quarterly, to NT$480.84 billion, with high-performance computing being one of the two largest revenue contributors, and smartphones suffering setbacks.
Anna Bhobho, a 31-year-old housewife from rural Zimbabwe, was once a silent observer in her home, excluded from financial and family decisionmaking in the deeply patriarchal society. Today, she is a driver of change in her village, thanks to an electric tricycle she owns. In many parts of rural sub-Saharan Africa, women have long been excluded from mainstream economic activities such as operating public transportation. However, three-wheelers powered by green energy are reversing that trend, offering financial opportunities and a newfound sense of importance. “My husband now looks up to me to take care of a large chunk of expenses,
SECTOR LEADER: TSMC can increase capacity by as much as 20 percent or more in the advanced node part of the foundry market by 2030, an analyst said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to lead its peers in the advanced 2-nanometer process technology, despite competition from Samsung Electronics Co and Intel Corp, TrendForce Corp analyst Joanne Chiao (喬安) said. TSMC’s sophisticated products and its large production scale are expected to allow the company to continue dominating the global 2-nanometer process market this year, Chiao said. The world’s largest contract chipmaker is scheduled to begin mass production of chips made on the 2-nanometer process in its Hsinchu fab in the second half of this year. It would also hold a ceremony on Monday next week to
TECH CLUSTER: The US company’s new office is in the Shalun Smart Green Energy Science City, a new AI industry base and cybersecurity hub in southern Taiwan US chip designer Advanced Micro Devices Inc (AMD) yesterday launched an office in Tainan’s Gueiren District (歸仁), marking a significant milestone in the development of southern Taiwan’s artificial intelligence (AI) industry, the Tainan City Government said in a statement. AMD Taiwan general manager Vincent Chern (陳民皓) presided over the opening ceremony for the company’s new office at the Shalun Smart Green Energy Science City (沙崙智慧綠能科學城), a new AI industry base and cybersecurity hub in southern Taiwan. Facilities in the new office include an information processing center, and a research and development (R&D) center, the Tainan Economic Development Bureau said. The Ministry
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
RSS