(Bloomberg) – The Taiwanese semiconductor maker has slashed its 2022 capital spending target by about 10%, a sign of the difficulty for the tech industry from the world’s most valuable chip company.
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TSMC said it expects to spend about $36 billion by 2022 on capital equipment, down from at least $40 billion previously. The sharp drop in spending – a key indicator of its own growth expectations for sectors from smartphones to servers and electric vehicles – suggests the Taiwanese company is bracing for a recession. broader recession than expected.
TSMC and its colleagues are grappling with Washington’s far-reaching restrictions on doing business with China, which are causing shock waves in the global semiconductor industry. Applied Materials Inc., a leading chipmaker, cut its forecast for the fourth quarter, while Intel Corp. is said to be preparing to lay off thousands of people.
The moves announced last week are the most drastic by the Biden administration as it tries to prevent China from developing a technological prowess it sees as a threat. The actions, which have angered Beijing, threaten to disrupt a global economy already dealing with a potential global recession, soaring inflation and lingering supply difficulties.
“It is too early to give a concrete number, however the inventory adjustment is likely to see its biggest impact in the first half of 2023,” CEO CC Wei told the news agency. analyst in a conference meeting. The impact of US containment measures will be manageable, he said.
Click here for a live blog of TSMC’s results.
TSMC shares have risen this week, bringing its market capitalization to about $320 billion from more than $550 billion in January.
The company reported better-than-estimated third-quarter net income of NT$280.9 billion ($8.8 billion), expecting revenue of $19.9 billion to $20.7 billion in the December quarter, although that assumes certain expectations for the US dollar at a time when Asian currencies have weakened.
Measures by the Biden administration limit the ability of companies using American technology to sell products to China. These include restrictions on the export of certain chips used in artificial intelligence and supercomputers, as well as stricter regulations on selling semiconductors to any Chinese company. any.
Fubon Research analysts led by Sherman Shang said in a note this week that chipmakers had a harder time moving their inventories and hit TSMC harder than they did. previous actions of the United States. The curbs mean about 5%-8% of TSMC’s total revenue will likely be limited, they said. Bloomberg Intelligence estimates TSMC could lose more than 10% of its annual revenue because of the restrictions.
However, Taiwan’s largest company is betting on sheer scale and industry-leading technology to overcome its biggest challenges in years. Hsinchu, Taiwan-based TSMC is the world’s largest contract chipmaker, producing for Qualcomm Inc., Apple Inc. and Nvidia Corp., all of which sell a significant portion of their products to the Chinese market.
On Thursday, executives reaffirmed their long-term revenue goals and declared 2023 a year of growth. TSMC is also committed to continuing to expand globally as needed, including in China.
The executives said that they have won a license from the US to continue operating and building its 16-nanometer and 28-nanometer lines in Nanjing, China, joining companies from SK Hynix Inc. to Samsung Electronics Co. announced that they had secured an exemption from the chip restrictions. from Washington.
The outlook for the electronics industry had begun to bleak even before the upheaval caused by Biden’s curbs.
Macroeconomic shocks have curbed consumer demand and business spending, while unsold inventory among PC vendors increased. According to IDC data, shipments of desktops and laptops in the third quarter fell 15%, and chip companies like Advanced Micro Devices Inc. said they were surprised by the speed and sharpness of the decline in demand. Memory makers Micron Technology Inc. and Kioxia Holdings Corp. announced production cuts of up to 30% to try and stabilize prices.
TSMC can’t count on continued demand for products from Apple, its main customer, whose growth has benefited the Taiwanese manufacturer for years.
While the California company has rolled out new chips to boost the performance of its devices, it recently abandoned plans to ramp up production of new iPhones, raising questions about demand for mechanical electronics. copy.
(Updated with executive comment from third paragraph)
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