Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday cut its revenue forecast for this year, citing a longer-than-expected inventory correction cycle, due to flagging demand for smartphones and computers.
TSMC in January said it expected revenue to grow slightly this year in US dollar terms.
However, the company yesterday said its revenue would contract this year, the first time in about 14 years.
Due to “weakening macroeconomic conditions and softening end-market demand, we expect semiconductor inventory to continue to increase in the first quarter and exceed the level in 2022 at a much higher level than we expected,” TSMC CEO C.C. Wei (魏哲家) told an online investors’ conference.
“In addition, the recovery in end-market demand from China’s reopening has also been slower than we expected,” he said.
The world’s largest contract chipmaker has not reduced its capital budget this year, keeping it at a range of US$32 billion to US$36 billion, counting on 5G, high-performance-computing and artificial intelligence (AI) devices to drive growth.
Growing interest in OpenAI’s ChapGPT is stimulating AI-related demand and helps digest inventories, Wei said.
“The trend is positive for TSMC,” he said.
As TSMC faces sagging customer demand, the company expects its revenue to dip 10 percent annually in the first half of this year, more than its previous estimate of a mid-to-high single-digit percentage fall.
Customers have continued to see chip stockpiles rise this quarter and might extend their inventory reduction efforts into next quarter, TSMC said.
Revenue this quarter is expected to drop 4.3 to 9 percent sequentially to US$15.2 billion to US$16 billion, the chipmaker said.
Gross margin is expected to fall to between 52 percent and 54 percent, from 56 percent last quarter, due to lower factory utilization.
“We believe we are passing through the bottom of TSMC’s business cycle in the second quarter,” Wei said. “TSMC’s business in the second half of this year is expected to be stronger than the first half, supported by customers’ new product launches.”
Wei said customers’ new products would be equipped with TSMC’s 3-nanometer chips.
Apple Inc, which usually launches new iPhones in the third quarter, is one of the first adopters of the most advanced chips from TSMC.
Addressing investors’ concerns over its projects in Arizona, TSMC said it expects its first fab in the US state to enter volume production next year.
The company did not provide further details on its participation in the US’ Creating Helpful Incentives to Produce Semiconductors and Science Act, after TSMC chairman Mark Liu (劉德音) earlier this month said that some of the provisions in the act were unacceptable.
“We are in the process of applying. We are unable to comment on specific details. However, we are in close and constant communication with the US government,” TSMC chief financial officer Wendell Huang (黃仁昭) said yesterday.
The chipmaker said it is making a strategic shift in its investment in a new fab being built in Kaohsiung.
TSMC plans to build advanced chip capacity at the Kaohsiung fab, rather than 28-nanometer chips, to avoid overcapacity, Wei said, refuting speculation that the company would scrap the investment plan.
TSMC is building 28-nanometer capacity in Japan and in Nanjing, China, Wei said.
It is also considering building a third such fab in Europe, he said.
The chipmaker said its net profit last quarter plunged 30 percent to NT$206.99 billion (US$6.76 billion), compared with NT$295.9 billion in the fourth quarter of last year. That represented an annual growth of 2.1 percent from NT$202.73 billion.
Earnings per share dropped to NT$7.98 last quarter from NT$11.41 in the prior quarter, but rose from NT$7.82 a year earlier.
Operating profit margin dropped to 45.5 percent from a quarter earlier, but exceeded the company’s estimate of 41.5 to 43.5 percent.
Gross margin also rose to 56.3 percent, outperforming the company’s expectation of 53.5 to 55.5 percent, mostly due to stringent cost controls.
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