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TSMC sees headwinds, flips to 10 percent decline forecast

TSMC sees headwinds, flips to 10 percent decline forecast

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By Peter Clarke

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TSMC’s CEO CC Wei said he expects the foundry to report an annual decline of revenue of 10 percent in 2023. Wei was speaking to analysts on TSMC’s 2Q23 earnings call.

For the second quarter the company reported a net income of NT$181.80 billion (about US$5.83 billion) on consolidated revenue of NT$480.84 billion (about US$15.83 billion). This was in-line with previous guidance.

But in terms of annual sales revenue TSMC has changed from predicting an annual increase of low- to mid-single digit percentage rise for 2023 compared with 2022 to forecasting a decline of 10 percent.

Wei said the company is sticking to its forecast for the 2023 global chip market excluding memory, which it reckons will decline by a mid-single digit percentage year-over year. The foundry industry overall is turning down and overall will decline in the mid-teens of percentage in 2023. This would leave TSMC, despite lower sales, performing better than its peers and gaining market share in a rapidly shrinking sector.

Weaker everywhere but AI

Analysts pressed TSMC’s executive for an indication of where things were weaker than before with little success. Wei said that it is a “macro-economic” thing with just about every sector showing lower demand with the exception of chips for artificial intelligence.

The global issues suppressing the macro-economy include the continuing war in Ukraine and lingering stagflation in many countries around the world. China’s economic recovery after a year of lockdowns in 2022 is happening more gradually than previously expected, Wei said.

AI is the exception but is not sufficient to overcome reduced sales and push backs elsewhere, Wei indicated.

Defining AI chips as GPUs, high-performance CPUs and AI accelerator ASICs, Wei said they are responsible for 6 percent of TSMC’s revenues at present. But he said TSMC forecasts this to grow at close to 50 percent CAGR for the next five years and as a result become responsible for low teens of percent of revenue.

Arizona delay

Also, during the call chairman Mark Liu tipped a delay in the start of operations at its wafer fab currently under construction in Arizona. Lui said TSMC is experiencing problems recruiting skilled workers to install semiconductor manufacturing equipment. To try and address this TSMC is sending experienced engineers from Taiwan to Arizona to train local workers. But the planned start of production of the N4 node there has had to be pushed back from 2024 to 2025.

TSMC’s joint venture fab with Sony and Denso however remains on course. It will utilize more mature process technologies at 12, 16, 22 and 28nm. Volume production is on track for late 2024.

Lui indicated no progress on TSMC bringing manufacturing to Europe. He said TSMC is still evaluating building a specialty fab in Germany, focusing on automotive-specific technologies. Talks continue with customers and partners but whether the project will go ahead depends on demand from customers and the level of government support that is provided.

Related links and articles:

www.tsmc.com

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