TSMC defies chip decline with record Q4;  cuts capital expenditures in 2023 as demand weakens

TSMC defies chip decline with record Q4; cuts capital expenditures in 2023 as demand weakens

TSMC defies chip decline with record Q4;  cuts capital expenditures in 2023 as demand weakens

  • Q4 profit of T$295.9bn vs. T$289.44bn, analysts say
  • Q4 revenue up 26.7% year-on-year to $19.93 billion
  • Sees CAPEX in 2023 at $32-36bn vs $36.3bn a year earlier

TAIPEI, Jan 12 (Reuters) – Taiwanese chip maker TSMC (2330.TW) reported a 78 percent increase in quarterly profit on Thursday as strong sales of advanced chips helped it counter a broader industry slump that hit cheaper commodity chips .

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chip maker, is a rare bright spot in the global tech industry as it struggles with deteriorating consumer demand driven by decades-long inflation rates, rising interest rates and an economic slowdown.

The quarterly profit of competitor Samsung Electronics Co Ltd (005930.KS) fell by two-thirds to an eight-year low, with the South Korean company blaming a weakening global economy that has driven down memory chip prices and reduced demand for electronics.

TSMC’s dominance in creating the most advanced chips for high-end customers such as Apple Inc (AAPL.O) saved it from the downturn. Still, it cut its 2023 capital spending plan on Thursday, highlighting the deteriorating demand outlook.

The chip maker now expects to spend between $32 billion and $36 billion, down from $36.3 billion in 2022, and sees first-quarter revenue in the range of $16.7 billion to $17.5 billion, down from $17.57 billion dollars a year earlier.

“We are confident that business will rebound in the second half,” boosted by the launch of products including technologies such as artificial intelligence, CEO CC Wei said on Thursday.

“We expect the industry as a whole to decline slightly, but TSMC to grow slightly” in 2023, he said.

TSMC, Asia’s most valuable publicly traded company backed by billionaire Warren Buffett’s investment conglomerate Berkshire Hathaway Inc (BRKa.N), has repeatedly said that business will continue to benefit from the “mega-trend” of demand for high-performance computer chips for 5G networks and data centers, and the increased use of chips in gadgets and vehicles.

On Thursday, he reiterated that slower demand is a cyclical issue and that 2023 will be a year of modest growth overall for the company.

In October-December, TSMC reported a record net profit of T$295.9 billion ($9.72 billion) from T$166.2 billion a year earlier. That compares to an average of T$289.44 billion from 21 analyst estimates compiled by Refinitiv.

Revenue increased 26.7% to $19.93 billion, compared to TSMC’s previously estimated range of $19.9 billion to $20.7 billion.

The fourth quarter “was dampened by weakness in end-market demand and adjustments in customer inventories,” vice president and chief financial officer Wendell Huang said at a briefing. Such conditions will continue in the first quarter, Huang said.

TSMC’s share price fell 27.1% in 2022, but is up 8.5% this year, giving the company a market value of $412.78 billion. Shares rose 0.4% on Thursday compared with a 0.1% decline for the benchmark index (.TWII).

($1 = 30.4420 Taiwan dollars)

Reporting by Yimou Lee and Sarah Wu; Writing by Ben Blanchard; Editing by Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.

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