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Slowdown Hits Semiconductors: TSMC Warns Of Revenue Drop, Reconsiders Expansion Plans
TSMC plant in Arizona, USA.
The global economic slowdown is now impacting the semiconductor industry as well. In an announcement that must have worried investors globally, Taiwan Semiconductor Manufacturing Company (TSMC), stated that they were expecting a revenue drop in the January-March quarter of 2023, of around 5 per cent, citing weak demand.
According to a report in the Wall Street Journal, TSMC is expected to earn somewhere between $16.7 billion and $17.5 billion in the ongoing quarter, compared to $17.57 billion in 2022 (Q1).
This will be the first revenue drop since 2019, given a strong demand, induced by the pandemic, has kept the semiconductor industry on its toes.
TSMC, in 2023, with a CAPEX of more than $32 billion will focus mainly on producing advanced semiconductors, ordered by the likes of Apple. However, a weakening demand is also an indicator of consumers holding back their purchases and could last for a while, given the inflation situation in the West.
TSMC, lately, has also been on an expansion spree. In December 2022, a plant was inaugurated in Arizona in the United States of America (USA). Drawing tax benefits from the CHIPS Act announced under the administration of President Joe Biden, TSMC could invest as much as $40 billion in its Arizona Plant, where it could begin manufacturing 3-nanometer chips.
However, a global slowdown could impact TSMC’s plans to build its first plant in Europe and a second plant in Japan. In Germany, TSMC’s plans were pushed back by a year due to the war in Ukraine. TSMC now is reevaluating the demand and government support in the region, looking at the slowing demand, before it commits to a plant in Europe.
TSMC, in the last few years, has emerged as the global capital and choke point for semiconductors. With the chip wars between USA and China heating up, and investors fearing an invasion of Taipei by Beijing, quite like Ukraine, the focus has been on getting TSMC to diversify its manufacturing across the globe, starting with America.
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