DSMC cuts capex on equipment delays, demand woes; Be cautious in perspective

  • Q3 profit of T$280.9 billion vs T$265.64 billion analyst view
  • Q3 revenue was up 36% year over year to $20.23 billion
  • Q4 revenue rose 29% to $19.9-$20.7 billion

TAIPEI, Oct 13 (Reuters) – Taiwan-based chipmaker TSMC (2330.TW) It cut its annual investment budget by at least 10% through 2022 and struck a note of more caution than usual on upcoming demand, flagging challenges from rising inflationary costs and predicting a chip slump next year.

TSMC CEO CC Wei said on Thursday that it has received a one-year authorization covering its factory in Nanjing, China, in response to recent U.S. export restrictions aimed at undermining China’s progress in advanced chip manufacturing.

While Washington is expected to protect some foreign companies operating in China, the new rules require companies that want to supply advanced gear to Chinese chipmakers to obtain a license from the US Commerce Department.

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“Based on our initial reading and customer feedback, the new regulations set the control threshold at a very high specification, primarily used for AI or supercomputing applications. So our initial assessment is that the impact to TSMC is low and manageable,” Wei said. .

Taiwan Semiconductor Manufacturing Co Ltd (DSMC), the world’s largest contract chipmaker, manufactures most of its chips in Taiwan.

After posting an 80% jump in third-quarter profit, the strongest growth in two years, TSMC said it was more conservative in planning investments for 2023.

“We expect the semiconductor industry to decline in 2023, but DSMC is not immune,” Wei said on a media call.

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TSMC’s dominance in making some of the world’s most advanced chips for high-end customers like Apple Inc (AAPL.O) and Qualcomm Inc (QCOM.O) That saved it from the fall flagged by chipmakers including AMD (AMD.O) and Micron Technology Inc (MU.O).

The Taiwanese company’s commentary on Thursday was in line with industry concerns over decades of high inflation, rising interest rates and COVID-19 lockdowns in China, which have squeezed the consumer electronics market.

Instrument delays

TSMC, Asia’s most valuable listed company, has cut its capital expenditure (capex) to around $36 billion for 2022. In July, the company said its previous capex guidance would ultimately be cut to $40 billion to $44 billion this year, with delays in the delivery of some chipmaking equipment pushing some costs into next year.

“Half of the change is due to capacity improvements and the other half is due to continued equipment supply challenges based on the current medium-term outlook,” Chief Financial Officer Wendell Huang said in a media call.

For the fourth quarter, TSMC forecast a 29% rise in revenue to between $19.9 billion and $20.7 billion compared to $15.74 billion a year ago.

The company said its data center and automotive businesses are now stable and its business overall remains more resilient than others.

“We say 2023 is still a growth year for DSMC, and the industry as a whole will slow down,” Wei said.

TSMC said in July that it saw little impact from the current downturn cycle in the sector as businesses shopped for high-performance computing chips used in 5G networks and data centers, and that long-term demand for its chips was “solid”. , as well as increased use of chips in gadgets and vehicles.

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Net profit for the third quarter ended September rose to T$280.9 billion ($8.81 billion), compared with an average of 21 analyst estimates of T$265.64 billion compiled by Refinitiv.

Revenue for the quarter rose 36% to $20.23 billion, compared with TSMC’s previously estimated range of $19.8 billion to $20.6 billion. China posted 8% revenue growth in the third quarter, up from 13% in the second quarter.

Shares of TSMC have fallen nearly 36% so far this year, giving it a market value of $323.7 billion. The stock fell 0.6% on Thursday, compared with a 2.1% drop for the benchmark index. (.TWII).

($1 = 31.8870 Taiwan dollars)

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Reporting by Ben Blanchard and Sarah Wu; Written by Sayantani Ghosh; Editing by Christian Schmollinger, Edmond Claman, and Ana Nicolasi da Costa

Our Standards: Thomson Reuters Trust Principles.

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